1. Excessive stock levels mean everything is taking longer to let
We’ve worked in all kinds of rental markets over the years, in different geographical areas across London, so whilst we’ll stop short of saying that we’ve seen it all, we have seen a fair bit.
When any large new development completes there are always those landlords that get ‘lucky’ and rent their property very quickly, but by the same token there are always landlords that get unlucky and it takes longer for their property to let. And often there’s no particular reason why some properties take longer than others – its purely down to over-supply of a particular unit type in a distinct geographical location.
Supply is one of E14’s biggest problems right now, particularly an over-supply of two bedroom apartments, but it will rent eventually. Let’s put some numbers behind it so you can see where we’re coming from.
The issue stems not from the odd buy to let property coming to the market here and there, but when large developments, of over 100 units, complete. The vast majority of units in new developments are purchased off-plan as investment vehicles – be that to complete on and rent out for a period, or, to sell on before completion – but relatively few are purchased with a view to being lived in by the purchaser.
Over the last 14 months or so, E14 has experienced an unprecedented amount of large new developments complete. Lincoln Plaza (comprising Talisman and Duckman Towers) completed late 2015/early 2016 and comprises 349 units. Charrington Tower (previously known as Providence Tower) completed mid 2016 and comprises 484 units. Horizons Tower completed mid-late 2016 and comprises 131 units. The first stages of London City Island (comprising Java House, Hercules House, Kent Building, Globe House and Grantham House) completed mid-late 2016 and 457 comprises units.
So across just those four developments over a period of just 15 months the area has witnessed increase of 1,421 units. And bear this in mind, these 1,421 units are all private residential units, they do not include social housing, shared ownership or affordable rent properties. We would suggest that approximately 60% of the 1,421 have come to the rental market. That’s around 850 units. So over the 14 month period, that’s 60 new units per month, or 14 per week, or indeed 2 every day.
And, sorry, just starting to complete right now is Baltimore Tower (known as Arena Tower), and that comprises 366 units.
So, looked at with a cold eye it’s perhaps not surprising that everything is taking longer to let. The property market’s performance is just based on supply and demand after all. Whilst demand is still strong, and it is, the current situation is there’s too much supply. It’s just going to take a little while longer for all these new units to be absorbed into the rental market.
OK, so you’re now slightly reassured that what you’re experiencing is not unique to you and is being experienced by others, but what can be done to fix the problem?
2. Your current agent is not doing all they can
We really appreciate and value the relationships we have with our clients here at Proper Local, but we’re not conflicted enough to suggest that sometimes changing your letting agent is the right thing to do, for all manner of reasons.
As an investor, you always need to be asking yourself whether your agent is doing all they can to rent your property.
With particular reference to the current high stock levels in E14, there are three key issues which you need to consider in relation to your current agent:
- Are they giving you the right advice?
Some agents shy away from giving you bad news, so if your agent is telling you that the market is very strong, rents are on the up and it’ll all be fine, then, sorry, they’re not telling you the truth. There’s too much stock and rents have fallen. The rental market has its ups and downs and as a landlord you need to respond to that, because if you don’t all that will happen is one thing: nothing! Empty properties and void periods cost money. Forget holding out for an extra £10 a week, get a good quality tenant in ASAP.
Respond to the market conditions in front of you, not what you’ve got in your head, or what the developer told you 3 years ago when you bought it.
- Do they have too much stock?
OK, this takes some proper honesty. As an agent we can never have too much stock can we? It’s what pays the bills. It’s the future of the company. But, if your agent has too many properties, perhaps even too many in the same development, can they really be giving you and your property the time it needs to get it let? Are they providing you with regular detailed feedback? Are they suggesting what really needs to be done to get it let? Or, because they have a long stock list, are they just taking it easy, knowing that it will let eventually.
Time is as important as money in property and many agents forget this. Does it matter enough to your agent whether your property is let this month or next?
- Is their marketing up to scratch?
Thankfully, the quality of marketing of most reputable Canary Wharf letting agents is good, in fact sometimes very good. But the issue we have right now is high stock levels, so what is your agent doing to make your property stand out? We live in an online world now. The vast majority of tenants conduct their property search on the web – they’re not popping into the office; the agent does not hold them captive like they did 10, even 5 years ago.
Your property is being viewed on the web, most likely on Rightmove and Zoopla. Does it have its own photos, say around 10 of them, and not generic pictures of the development? Are those photos professional quality, or were they just taken on an iPhone or the ‘office camera’? Does it have a floor plan? Does the property description mark it out as being different from other properties? (Or, irritatingly, does it just say its “stunning”). Is it actually on Rightmove AND Zoopla, or just one or the other?
3. Your property is now looking dated
Sorry. It’s your turn to look at yourself, or more rightly your property, in the mirror. The problem with new developments is that they make what used to be ‘new’ look ‘old’. If you own a property in one of the area’s older developments, you need to make sure that its being shown to its best. Seemingly every new development these days has a gym and a 24 hour concierge, and many have swimming pools, valet parking, business centres and cinema screening rooms too, and if your property doesn’t benefit from these niceties – and many don’t – then the property itself needs to be A1. Cracked paint around the door frames and skirting boards, grubby walls, worn carpets, dirty curtains and twenty-year-old furniture just won’t cut the mustard I’m afraid. It’s often true that you need to spend money to make money, and it couldn’t be truer right now. More than this, if you don’t spend a few hundred pounds, or maybe even a little more, then there’s a very real chance that your property will remain empty.
We don’t say this because we want to sell you a furnishing pack, or pick up a referral fee from a builder, we say this because this may well be what needs to be done to bring your property up to standard. Standards have increased.
Rents in E14 have fallen by 5 -10% over the last year or so and there’s no getting away from that. And whilst we believe that we’ve probably reached the bottom of this particular ‘bump’, its imperative that you look at your agent, your property, and your own strategy with a stronger sense of realism than you may have had to up until now.