London rental price rises to outpace house price increases in 2015

London rental price rises to outpace house price increases in 2015

The rental market in the capital has been strong for a few years now - of that there can be little doubt. As generation rent has come more into play, and more and more people have looked to take advantage of the demand from people simply looking for convenience through renting a home, rental prices and yields have risen time and again. 

In fact, this year it has been the case that the cost of renting has hit a number of record highs, and as house price rises in London have started to soften somewhat, the yields enjoyed by landlords who own in-demand properties have fluttered around an impressive six per cent. 

And according to a new report, this is a reality that is set to continue into 2015, with the price of renting likely to outpace the rise in house prices. So is now the time to invest ahead of yet another good year for the British private rented sector? 

According to Marsh & Parsons, the cost of buying a property should rise in the capital between three and five per cent throughout the course of 2015. And while this is good news for investors who are looking to capital gains as their main source of income, it will still be trailing behind the performance of the rented sector and a fair bit below the 11.5 per cent that was witnessed in 2014. 

The estate agent believes that the next year will see rental prices increasing by ten per cent. For landlords, the feelgood factor that has been in evidence for the majority of 2014 will mean it becomes more likely that they will want to invest further in the rental sector. 

In fact, recent reports have shown that as many as half of all landlords across the UK want to increase their portfolios in 2015, and with predictions for demand and rental rises currently looking so positive, it's easy to see why this would be the case. 

"The rental market will be where much of the action takes place in 2015. Those relocating to the capital for work are now biding their time before purchasing their own portion of London property, until question marks surrounding additional property taxes are erased," said Peter Rollings, chief executive officer of Marsh & Parsons. 

He stated that the upcoming general election is likely to be just one of a few factors that affect the residential rental market in 2015. As more people move to the capital, uncertainty over factors such as the mansion tax, proposed by Labour, will mean that more people choose to rent in the run up to the vote. 

Mr Rollings went on to say that it's important when demand from both tenants and landlords is so high that the integrity of the rental market is preserved. 

"This will push demand in the corporate lettings sector even further, and the biggest rental increases are predicted to be among one or two bedroom flats. Supply of rental properties looks set to be sustained, but any regulatory changes to tenancy fees under a new government could inflate rents artificially," he said. 

"The powers that be need to ensure that landlords are not spooked out of the market by unnecessary layers of legislation, and that aspiring property investors don’t take their money elsewhere," Mr Rollings added.