The rental market in London is soaring and with easier lending criteria and renewed confidence in the sales market, many homeowners are opting to upsize and buy a new property while retaining their existing home and instead rent it out.
This trend of ‘let to buy’ where you let your existing home in order to buy another, has become increasingly popular over the last few years and looks set to rise further as the property market in London continues to improve.
Damien Brown, Lettings Manager at KFH’s Crouch End branch, says: “In the current market where both sales and lettings prices are soaring every day, we’ve seen a noticeable increase in the number of first time landlords. Very often, these are young couples who managed to get onto the property ladder a few years ago and subsequently have seen a considerable increase in the value of their property but who now find they need to upsize for a growing family. We've noticed that they often opt to purchase in less expensive, outlying areas of London or even make a bigger move into the country. Keeping a London home which will appreciate in value over the years while bringing in a rental income is a key factor for them and so this is the ideal solution.”
Interestingly, in 2012 only 10% of Damien’s landlords were of the ‘let to buy’ variety, while this year, that figure has risen to 24%.
John Phillips, Financial Services Director at KFH, supports this trend and comments: “Let to buy is becoming increasingly popular in the London property market, and I’d estimate that between 10% and 12% of our current agreed mortgages this year have been for this type of transaction. In the London market, factors such as a good rental market, strong capital appreciation and access to better mortgage availability have combined to make it a very attractive option for many looking to upsize but without the considerably higher deposits required for a traditional buy to let investment.”
At KFH, our average rent in London currently sits at around £1,600 per month. A one bedroom flat which is situated within the zone 2 and 3 residential areas of London such as Putney, Crouch End and Balham, typically achieves in the region of £350 per week. In the more prime areas of zone 1 however such as Holland Park or Bayswater, landlords can expect to achieve closer to £500 per week for the same property. In many parts of London, property prices have risen by more than 10% this year so far, with the result that many are now remortgaging and finding let to buy an ideal way of becoming a first time landlord.