A report from Hamptons International says that the increasing cost of letting is deterring some landlords and as the relationship between investment and return narrows, some landlords have commented that they are better putting their money in the bank.

The firm says the number of rental properties being withdrawn is 16% higher than last April and 23% more than in March 2004, indicating that more landlords are opting for the sales market.

Stock levels in both London and country regions continued to fall compared to last April 2003’s levels, says the firm. Last month they reported rental stock was 41% higher than the previous year and this month their portfolio has fallen by 10%, now 31% higher than April 2003. Whilst the surplus remains high, landlords should be encouraged by the falling properties levels, the firm comments.

As to demand, Hamtons says there may be fewer tenants around, but those in the London market are certainly motivated! Despite the facts that the number of applicants registering is down by a third over last April and 5% fewer viewings were undertaken certain types of rental properties are being snapped up. Compared to last April offers are 23% higher, lets are up 13%, re-lets are up 24%, while new business is up 17% and renewals up 15%.

In short, despite significantly fewer prospective tenants, London’s pipeline of prospective lets has increased by over 16%, which will convert within the coming weeks.

Conversely Hamptons country branches have had different experiences. Managers have been frustrated by an increasing number of deals falling through – 30% more than in March 03 (again showing the Jan-March 04 quarter as a real challenging period). Much of this is down to the impact of the ‘in betweeners’ and shorter-term tenants.

Prospects for Interest Rates

Jonathan Cornell at Hamptons International Mortgages observes: “Recent housing data was always likely to give the MPC ammunition for increasing rates.”

Cornell advises that a good way of working out where base rates are heading is to look at LIBOR, the rate which banks charge each other to borrow money. It is a useful indicator of the City’s expectations. For example, at the end of April (the week before the recent 0.25% increase) LIBOR was as follows:

This suggest a further 0.5% rate increase within the coming year, half of which is expected in the next 3 months.