Private Rented Sector (PRS) Outlook for 2011 House Prices, Rental Levels and Mortgage & Development Finance

LONDON, ENGLAND, December 05, 2010 (Press-News.org) Property price indices are notoriously poor at presenting an accurate picture when transaction volumes are at the low levels that are currently being experienced, but the consensus is that prices have been stabilising in recent months and in some locations, falling back. It is likely that 2011 will present a similar picture, as access to finance remains an issue and the demand from purchasers remains subdued.

However, generalisations are fraught with danger and some local markets will outperform the average by quite some distance. I would expect prices in well-connected areas of London such as SE1, N1 and the City postcodes of EC1-4 to hold up well relative to the wider picture, and I would not be surprised for prices of the best quality stock close to the transport hubs to experience a small year-on-year increase.

Rentals
With the mortgage market remaining a closed shop to many would-be first time buyers, the pressure on the Private Rented Sector is only likely to increase. This, coupled with the underlying demographics of increasing housing demand - at a time when the supply of new homes is at an all time low - means that the current upward pressure on rents will continue well into 2011. Latest figures from LSL show that nationally rents have increased by an average of 4.5% in the past 12 months to almost GBP700 per month, and in London and the South East, where the housing pressure is greatest rents are now 6.8% higher than a year ago and Findaproperty reports that average asking rents in London are now GBP1,818 per month.

Young London's central London office, covering property across transport zones 1 and 2 has witnessed a marked increase in competing offers for property and average void period is down to just 2 days (the minimum turnaround that the agency will allow to enable thorough check-in/out and cleaning) across the hundreds of properties that we manage.

As rentals are increasing, both landlords and tenants need to take steps to ensure they do not run into difficulties with rental arrears. Tenants need to be realistic about their property expectations and not overstretch themselves; equally, landlords need to ensure that tenants' are being adequately referenced and credit checked in the first instance.

With the Government's changes to the LHA looming, there has been much talk of its impact on the Private Rented Sector. If the predicted rush of tenants from the social sector into the PRS does take place - and personally I don't think that it will - it is likely to increase demand for property at the lower-to-mid range price points, which will have a knock on effect across the rental market with increasing pressure on rents. However, now that implementation of the proposed new measures has been delayed, the impact over the next 12 months will be much less significant than previously expected.

Financing
Despite occasional short-lived headline grabbing products, as the end of the year approaches, the picture remains largely unchanged from that seen at the beginning of 2010. Any wholesale changes to the mortgage market remain a distant hope as banks remain reluctant to lend. The same is true of development finance; those looking to secure funding for construction need to look to innovative new approaches and finance models to demonstrate commitment and capital of their own.

Base Rate
Around 6 months ago I had a small wager (with the proceeds going to our charities) that the base rate would remain at 0.5% until at least the end of 2010. With just one Monetary Policy Committee meeting to go, I am feeling confident. I have to say, I do not expect the base rate to rise for some time yet; the impact of the austerity measures are yet to fully kick in and economic fragility is likely to remain a characteristic of UK Plc throughout 2011. I would not be surprised to see the base rate at 0.5% at the end of 2011.

.About Young Group
Young Group is shaping the Private Rented Sector through research, investment, finance and asset management. The Group's activity spans the entire investment cycle from identifying opportunities and financing their acquisition, through to managing the asset, regularly reviewing the performance of the property holdings and advising on strategic direction, through to realising returns in the most tax efficient manner.

Young Group delivers day-to-day asset management through Young London, its lettings and management agency, which has won multiple awards from The Times, The Sunday Times and Bloomberg for the quality of its service.

Young Group is proud to support NORWOOD and CHILDREN with LEUKAEMIA, two charities doing valuable work that is particularly close to our hearts.