London buy-to-let owners welcoming new wave of demand

London buy-to-let owners welcoming new wave of demand

Smaller properties are driving an all-new wave of demand in the London private rental sector, according to a new report that credits an increase in young tenants coming to the Prime Central area of the city with helping to bolster returns. 

According to the findings published this week by Savills, prime rental locations in the city have now seen rent prices rising by 1.4 per cent in the space of the last 12 months. It said that a higher number of rental agreements in one and two-bedroom flats and apartments was behind the demand that has helped push rental prices ever higher. 

Landlords across the UK have been enjoying fantastic conditions of late, with reports that rental prices hit an all-time high last month giving them the sort of favourable conditions that has made buy-to-let such a strong asset class since the financial downturn. This latest news about demand in London will be further good news for owners.

Even outside of the centre of the city, Savills reported that demand for smaller properties is helping to drive a real strength in the sector. It said that in the past year, commuter zone properties have seen rental prices climb by 1.3 per cent.

Lucian Cook, director of residential research at Savills, said that international students and young professionals are increasingly behind the drive to strength in the market. These are both groups that are increasingly renting rather than buying in the prime areas, thanks to the mobility and convenience that living in this way provides. 

"As is typical at this time of year, when the University year begins, wealthy international students drove the demand most evidently in prime central London due to the proximity of world class universities," he said. 

"In contrast, young professional sharers or couples are drawn to less expensive prime locations such as Canary Wharf, Wapping or Islington. This reflects the fact both areas provide easy access to the financial services centres of Canary Wharf and the City, as well as the emerging tech centres in East London."

Mr Cook also went on to say that the rising demand these groups are causing for smaller rental properties could drive an increase in investment from landlords who need to adapt to buy stock in high demand.