The big London landlord comeback

A summer rental boom has brought a wave of investors back to buy-to-let markets in the South, reports Melissa Lawford

Apost-lockdown rental boom of soaring rents and gazumping tenants has seen London yields surge, reversing the fortunes of buy-tolet investors in southern England.

For years, landlords have been ditching more expensive locations for higher yields in the North, in the wake of the tax crackdown. Now a new wave of small-scale investors have rushed back.

Data from Hamptons estate agents showed that, so far in 2021, six of the top 20 local authorities with the largest share of landlord buyers were in the south of England. This was double the 2019 level.

In London, rents have climbed faster than flat prices. Yields jumped 0.4 percentage points year-on-year – the steepest rise in the country. In Islington and Lambeth, yields rose by 0.6 and 0.8 points, respectively. In Hackney, they jumped two points.

Sean Moore, 61, manages a portfolio of five properties near the City of London. During the pandemic, occupancy fell by 60pc; now fortunes are reversed. “I’m getting two or three calls a day from agents asking if we have any more properties because demand has gone through the roof,” said Mr Moore.

When he listed a flat in Islington, estate agents were falling over themselves to secure it. The property let for £210 per month more than its £1,500 asking price, the highest Mr Moore has ever made from it.

Jeff Doble, of Dexters estate agents, said: “This summer has swung everything on its head. We are absolutely besieged by people looking to rent.” Hackney is the epicentre of the rental resurgence because it is so popular with young professionals, who are returning to the office after lockdown, he added.

The strain of the pandemic on London landlords has left scars, with many leaving the sector. According to data firm LonRes, rental listings in August were down 28pc on the 2015-2019 average.

Daniel Parker, of Savills estate agents, said: “The dynamics of supply and demand are absolutely nuts. Around the City, renters are calling up trying to gazump after tenants have paid deposits.” In Shoreditch and Clerkenwell, rental prices have bounced 20pc since their pandemic trough, pushing them 3pc above 2019 levels, said Mr Parker.

These newly attractive yields have lured back small-scale landlords, who had jettisoned their portfolios in the wake of tax changes.

“We have a banker in his mid- 40s who had divested his portfolio over the past four years. Now, he is buying again,” said Mr Parker. Another investor who left the market a decade ago has just bought in Islington.

The boom is also bringing in new landlords. “In Clerkenwell and Shoreditch, we have sold three properties in the past few days, all to first-time investors in their 30s,” said Mr Parker.

Meanwhile, the shift to working from home and the desire to upsize is still firing up rental markets across the south of England. Richard Adamson, of auction house Allsop, said: “A number of investors are following the tenant demand for properties further out.”

In Portsmouth and Southampton, landlords made up 27pc of purchasers to date this year, while in Plymouth it was 23pc, according to Hamptons. Katie Mason, of Connells estate agents’ office in Plymouth, said supply is not meeting demand. “I only have two available rental properties and they are both fully booked for viewings,” she said.

The market is so fast that one of these houses has not actually been purchased yet by the landlord. The investor is completing on the sale this Friday and will be marketing it on Saturday.

Andrew Loudon, of Morris Dibben estate agents in Portsmouth, said: “Properties that we rented in 2019 for £750 per month now go for £950.”

Of the 430 properties Morris Dibben’s Southsea office manages, 15pc are new landlord purchases this year. “It would be much higher, but there is not enough for landlords to buy,” added Mr Loudon.