The first quarter of 2016 provided a welcome improvement on the previous quarter:
Property viewings were 30% higher and the number of new applicants rose by nearly a third. However, these numbers should be viewed within the context of the last quarter typically being the least active of any year. In fact while the first three months of this year were more active, getting tenants to commit to new tenancies proved challenging and the number of agreed lettings only rose by 10%. New applicant numbers were 12% down on the corresponding quarter in 2015.
Tenants, especially corporate tenants for whom relocation budgets are tight, remained price conscious and also had a larger selection of properties from which to choose, as the number of available homes to rent rose by more than a third during the quarter. In the core central parts of London, tenants are more property-driven than location-driven than was the case in the past, with an emphasis on finding best value for money.
The increase in the number of homes available to rent was largely the result of landlords attempting to beat the 1st April 2016 deadline after which an effective 3% was introduced on all additional property purchases, and fears of a retreat of buy-tolet (BTL) investors from the market have so far been unfounded. There was a notable increase in activity from BTL investors and the Council of Mortgage Lenders (CML) reported a 28% increase in BTL mortgage loans in the first two months of the quarter.
Estimates for March lending show a 60% increase on the February figure, which preliminary analysis from the CML suggests was predominantly down to buy-to-let house purchases. However, we need to see how investor appetite for acquisitions fares from April onwards in order to properly assess the full impact of the new stamp duty surcharge.
While many tenants value continuity, tenant renewals rose by just 5% compared to the previous quarter and by 6.5% compared to Q1 2015. This reflects the greater choice available to tenants as a result of the significant increase in available rented homes and means that landlords still need to be flexible to prevent lengthy void periods.
Viewings from relocation agents fell by 12% over the quarter, which may reflect greater caution on the part of multinational firms refraining from relocating their employees to the UK in significant numbers while uncertainty persists in the run-up to the EU referendum over the potential impact of a vote to leave.