Nigerian Bank Nigeria – Rents To Rise In 2010

Source ft.com: 15 January 2010

Buy To-let property investors are likely to see the rental income from prime London homes increase in the next 12 months, the first good news for landlords after years of falling rents.

Rents in central London increased 2.3 per cent in the three months to December, according to data from estate agent Knight Frank. The average central London rent ended last year 7 per cent lower than at the start of 2009 – but this represents an improvement from the mid-year position, when rents were down 19 per cent on an annual basis.

This recovery in rents in the second half of the year resulted from a reduced supply of rental properties and growing demand from City employees, according to Liam Bailey of Knight Frank. “We think it is a promising year for landlords,” he says. “Landlords aren’t being over-ambitious with rents but they are suddenly asking for a bit more than they were a year ago – which is quite a turnaround,” he says.

According to FindaProperty.com’s December 2009 rental index, seven London boroughs commanded higher rents than in December 2008. The top risers include Kensington & Chelsea at 5.4 per cent and City of Westminster, where rents rose 3 per cent over the year. Haringey saw the fastest recovery, though, with rents rising 8.7 per cent, Bailey says buy-to-let property owners could see rental growth of 5 per cent this year in prime central London, but it predicts that growth outside of London will be flat.

“The return of growth in prime rents has come at a time when activity in the [residential] sales market has increased dramatically, rapidly eroding the surplus stock as some accidental landlords have chosen to sell,” explains Lucian Cook, director of research at Savills. However, Savills is more cautious on the outlook for 2010, predicting that prime central London rental values will plateau at their current level before increasing by 4 per cent and 10 per cent in 2011 and 2012, respectively.

Cook says: “There is undoubtedly some longer term upward rental pressure to come, driven especially in the lower tiers of the housing market. Here, potential first-time buyers will find deposit affordability a barrier to buying and drive demand for rented stock.” Nevertheless, he warns that, in the short term, rental growth is likely to be tempered by the weak underlying economic conditions – and the time it will take for available rental stock levels to fall back in line with the long-term average.

Estate agents agree that the critical factor this year will be the balance between supply and demand. “The expectation is that a lot of rental properties will go into the sales market this spring,” warns Bailey. “If they find the sales market isn’t strong enough and return to the rental sector, then rents could slip again.”

Nigel Lewis of FindaProperty.com believes demand for rental properties will remain strong over the next few years as first-time buyers continue to find it difficult to obtain mortgage finance. Buy-to-let investors are also likely to be buoyed in 2010 by a gradual increase in buy-to-let lending as the year progresses, experts say. in the past two weeks, the buy-to-let lending market has seen an increase in competition, with a wider range of products being offered and lower rates announced.

Clydesdale Bank re-entered the buy-to-let mortgage market last week with a 5.99 per cent two-year fixed-rate deal, with a £1,499 fee. It requires rent to cover the mortgage repayments by 130 per cent, but is available on up to 70 per cent loan-to-value (LTV), with a maximum loan of £500,000. A free valuation and legal fees are included.

A more attractive deal is available from Godiva, the specialist lending arm of Coventry Building Society. It has a 5.24 per cent two-year fixed rate, with a £1,050 fee. It requires rental coverage of 125 per cent of mortgage repayments, and is also available on up to 70 per cent LTV with a £500,000 maximum. It includes a free valuation and legal fees for remortgage business.

For larger properties and loans, many private banks will lend on investment properties.

Nigel Bedford, mortgage manager at largemortgageloans.com, says First Bank of Nigeria will lend between £2.5m and £25m on London properties. The bank lends at 60 per cent LTV at a variable rate of 4 per cent with a 2 per cent fee. “There are no restrictions as such on the number of properties they will lend against, but everything is bespoke,” Bedford explains. “They are interested in deals that are in prime locations and wealthy clients – they are after ‘vanilla’ cases,” says Bedford.

Phil Calder bank, director at letting search.co.uk, says that if investments in alternative asset classes continue to under perform, buy-to-let investors with cash for a deposit may look to invest in further properties in the second half of the year.

Estate agents note that rental yields remain stable in the prime and mainstream markets. Average gross yields were 4.52 per cent in December, according to FindaProperty.com, compared with 4.62 per cent a year earlier. “When investors compare this to cash deposits, it looks very good,” says Bailey. “There is still a push for people with cash to put their money into property.

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