Friday 29 May 2015

What effect will lack of supply have on the private rental sector in Clapham & Brixton?

I went for a coffee the other day with a landlord in Clapham and he was interested in my views on the property market. I thought I’d share a bit of our conversation as a lot of you may be thinking about the long term effects price rises have on the market.

He asked a valid question: he asked me whether the property prices rising in Clapham is merely due to lack of supply and that estate agents will suffer due to a decrease in the number of transactions (a lot of properties are being bought now as rental investments, and as you know they are medium to long term investments) or whether there is more to it than that. The answer to this is complicated and I am merely one man of course, offering one opinion, which is as follows:

There is certainly a reduced supply. But this is London. There is always a lack of supply, I can’t think of a time other than the recession when there was an abundance of property and not enough buyers around. Something on the market, presented and priced well, will sell in a short space of time (sub 4 weeks). If not sold there’s something wrong – price, presentation, difficult tenants and you can’t get in, it’s a building site and pitched to end-users to name a few barriers to sale. The government isn't suddenly going to raise interest rates to make people homeless overnight, so I'm not expecting a flood of properties to be sold all of a sudden. So no big knee jerks from the government and supply should remain fairly constant, with demand staying steady but coming from older buyers, using property as a pension/investment for kids, bank of mum and dad helping the youngsters and so on. Trend is that there is more lettings stock and less sales stock. Will estate agents suffer? Those who don’t do lettings and do it well will certainly be missing a trick. I have seen a few competitors sell their lettings arm over the years but to me that’s like a car dealer selling off his servicing department and focusing on car sales – if the market turns and less people are buying cars where is the bread and butter? Oops.

Another thing he asked me was whether the licensing of rental properties was going to have a negative effect on buy-to-let. I think if you are a dodgy beds-in-sheds type landlord, then yes – it will have a profound effect. You will have to clean up your act. And true to this, you’ll be reading more and more headlines along the lines of: “Mr Landlord fined £50,000 for letting a doghouse to young vulnerable couple” and so on… Does it matter to genuine, honest buy-to-letters? No. It’s easy enough to comply with the law, you have your agent do that for you anyway. Many of my readers will see the value of a good letting agent. They are far more experienced at stringing a tenancy together, letting hundreds of properties every year, with all sorts of different circumstances. Certainly different to letting the same property 10 years running. And if you are – why are your tenants only staying for 1 year?!

If you have a question, have an investment you’d like a second opinion on, or just fancy some property patter then by all means drop me a line on or call me in the office on 020 3397 2099.

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