Rentals are on the move
Autumn Property Survey
Sunday 01 October 1995
You get no tax relief and no chance of making a killing if the property market takes off. In the long run it may still be cheaper to take on a mortgage. But renting offers convenience and mobility, and can be as hassle- free as you want. You do still need to pick your landlord with care, however, and scrutinise the fine print of your rental agreement.
The explosion in the rental market over the past three years, particularly of serviced apartments (where the company you rent from takes care of the problems) has been driven by the new breed of young professional whose job demands flexibility. A recent survey revealed that up to 50 per cent of all prime tenants now are in their thirties.
In Europe the young and salaried do not consider buying a home until they want to settle down and bring up a family. And in the United States your job prospects are closely tied to a willingness to move. This trend has taken longer to infiltrate Britain, but as the economy has evolved over the last 10 years, ownership now comes much later in people's lives.
Renting used to be associated with luxury service apartments and seedy bed-sits and difficult landlords, with little in between. It was what you did when you could not afford to buy, and the supply of rented properties was shrinking steadily because landlords were reluctant to create sitting tenancies.
The Government reacted by introducing the 1988 Housing Act, designed to create a more flexible arrangement between tenant and landlord by reversing the trend towards regulated rents and security of tenure that had discouraged landlords. At the same time, would-be vendors who could not sell had the opportunity to let, knowing that vacant possession would be obtainable at the end of an assured shorthold - which in turn increased the availability of rented property.
The private rented sector is still small compared with local authority housing and owner/ occupation, accounting for 10 per cent of housing stock, but it is forecast to grow to up to 15 per cent in another 10 years - and not just in the prime London market.
Rob Thomas of the investment bank UBS said: "It seems to be a national trend. Up until five years ago you would not have seen a property to rent anywhere. London used to be the only place with a decent-sized rental market but the rest of the country is now just as good."
"The market has fundamentally changed," says Paul Mugnaioni of Quality Street, a company that specialises in high-quality serviced accommodation. "The whole structure of people's lives has changed. People need the flexibility to move around with their work - not a millstone around their neck, particularly if they have had to deal with one or two redundancies already before they hit 25."
Quality Street, which was launched in 1987 in partnership with Nationwide Building Society, now has shops in Aberdeen, Glasgow, Manchester, Bristol, and north and south London. It has around 5,000 properties on its books, half of which it owns. Gross rental income amounts to about pounds 22m a year and it owns gross assets of around pounds 150m. It even builds some of its properties from scratch, benefiting from local grants. Its appeal lies with its total service approach. QS will fix your washing machine and mow your grass if that is what you want.
You can rent for periods from a month to 10 years, and what you pay depends on the time you want to stay and whether or not you choose a furnished or unfurnished flat.
As the market has evolved it has become more sophisticated and is attracting financial institutions that view it as a realistic investment. Kleinwort Benson Development Capital recently completed the pounds 44.2m funding of the London & Henley group, aimed at acquiring, refurbishing, and letting central properties to cash in on the boom. Ian Grant of KB says that he expects L&H to grow significantly over the next few years.
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