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/ by Carol Pawsey

Lettings market review and 2014 prediction

Tenant levels have been high throughout 2013 and this has been matched by a steady level of stock compared with 2012. With a more level market, we have not seen such a large uplift in rents for 2013 with an average annual rental increase of 5% compared to 2012

Demand in the private rental sector (PRS) remains high and we have seen a 15% increase in transaction levels to date. On the back of a buoyant market, confidence among the landlord community appears to be growing. There is very active investment in the buy-to-let sector where investors are either taking advantage of better rates or alternatively are releasing equity in order to fund future portfolio growth. Either scenario is giving a welcome boost to the letting stock base.

With house prices continuing to rise, many tenants are renting out of necessity as home ownership is financially out of reach. As a result we are seeing a trend for longer tenancies as tenants seek stability in the rental sector. Our average tenancy in 2013 was 16 months and this looks set to rise in 2014.

In London, over 25% of households are private tenancies and it is estimated that this could reach 40% in 10 years’ time. Renting long term is becoming the norm and this, matched with institutional and private investment into the PRS, indicates that the lettings market is set to be strong in 2014 and beyond.

Whilst some tenants will inevitably be helped by the Government backed Help to Buy scheme to make their first purchase, there is a constant demand for rented accommodation in London. We’re seeing many tenants who are making a lifestyle choice and do not wish to be tied to the long term financial commitment of a mortgage or the nature of their jobs requires flexibility.

The current trend of longer tenancies is likely to continue and many of our landlords who have invested in property seeking long term stability are now factoring in annual rent increases. In addition, we’ve seen a steady increase in overseas investment where Landlords require full management of their property or portfolio in order to ensure that their investment is maintained and achieves optimum rent. A review of our current stock shows that rental yields are offering on average 5%. I would estimate that transactions will rise by at least 15% in 2014 and so long as supply and demand are at equal levels, rental prices should remain stable.

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Expert Carol Pawsey
Carol Pawsey Group Lettings Director at KFH
Carol joined KFH in 2004 having worked in various senior roles within the lettings industry. Carol spent seven years as a regional director for the South West region before her promotion to group lettings director, where she now works closely with the main board and the divisional operations team to ensure the cohesive functioning of all 29 lettings branches. Outside of work, Carol enjoys eating out, gardening and whizzing around the countryside on her moped called Gloria.

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