According to Knight Frank’s London Residential Review Summer 2008, the problems faced by residential sales are strengthening the lettings and professional property investment markets.

The review found that many potential buyers are continuing to rent as mortgage lending continues to tighten and so many tenants now see themselves remaining in the private sector for the medium-term. In the past, potential buyers saw rent as ‘dead money’ which could have been spent on the mortgage of their own property, but falling house prices and the threat of negative equity has allowed renting to be seen as a ‘safe’ option which offers value and flexibility.

The Capital has seen an increase in the number of rental properties available. For those people who need to move but are unable to sell, renting their property has become the only viable option and they have become what the review describes as ‘reluctant landlords’. A number of developers have also begun to take on the role of landlord. Unwilling to sell their properties at too great a discount, some developers have begun to find tenants for the short to medium-term until house prices begin to rise again.

Liam Bailey, head of residential research at Knight Frank, told PIN: “There is currently strong supply for rentals and the market is not oversupplied. Rents have shown strong growth over the last year although I think there is only limited scope for increases this year as they will rise with wages. The rental market in London can be adversely affected by corporate employment, the effect of redundancies is not something we are seeing at the moment but may start to become a feature next year.”