Rental market volatile & variable

I was phoned up last week by a London landlord looking for advice on rent rises. I explained as a rule of thumb rents across the UK have risen on average about 10% but this hides huge variations across the country, regions, towns and even parts of towns.

Where do professional landlords go for their landlord insurance?

For example some parts of London such as Kensington & Chelsea there has been dramatic recent rises in rents. Central London rents rose by 16% during 2007 according to Knight Frank whilst these rent rises have now moderated into 2008. This has all gone on at a time where rents in some of the provincial city centres such as Leeds, Nottingham and Manchester have been slumping as a result of a dramatic oversupply in purpose built rental accommodation. Other areas are seeing modest or no rises even though demand for rental property remains strong as many potential purchasers put off purchasing property whilst they wait for conditions in the housing market to stabilise.

The rise of the amateur landlord
The latest fly in the ointment to predicting rent levels is the rise of the so called amateur landlord. This is where homeowners who are unable to sell decide instead to rent out their property hoping that market conditions will improve in the mean time.

The Financial Times reported over the weekend that with mortgage approvals at a record low many sellers are unable to sell. These sellers are getting more desperate and are instead listing their property to let. This has led to a significant increase in the number of homes with both "to let" and "for sale' signs outside.

This flood in forced lettings from 'amateur landlords' could be a threat to the rental levels landlords achieve which have been looking quite robust over the last few years. Rental growth has helped to keep rental yields stable during rising house prices and now yields are once again increasing as a result of rents and falling capital values.

My analysis and advice in short to landlords is if they really want to know what is going on ask a local letting agent - they are best placed to tell you what you should be charging and what rents are being achieved. Once you have got their insight, there is nothing stopping you doing the marketing of your rental property yourself and saving a 'hatful' of money into the bargain.