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Research reveals there is a demand for London only mortgage products

The inaugural Residential Yardstick shows that one in five respondents were renters and 86% of these were Londoners, leading the researchers to suggest that private rented sector (PRS) lending products for the capital would help keep property in local hands rather than relying on foreign investment as has been the trend in the past two to three years.

The survey revealed 45% of private owners, 55% of investors and 50% of renters want to invest in a property during 2012, however, 35% said a lack of mortgage availability and 19% said unattainable lending criteria were among the main barriers to investment.

Three quarters of Londoners believe rental prices will increase during 2012 while more than half of the regional respondents believed rental values would remain the same. The difference in perception enforces the researchers’ argument that London PRS investment mortgages could provide a valid solution to housing issues in the Capital.

Adding to the demand for London rental investments is the perception that property values have stabilised meaning now is the right time to secure an asset before inflation and interest rates rise.

Some 46% of all respondents throughout the UK believe PRS will outperform investments in freeholds, shares and bonds, commodities and commercial property, the research also found.

‘Most of the respondents were Londoners so what’s obvious to me is that lenders should be looking at creating London specific mortgage products, in particular for the PRS investors,’ said Roger Southam, chairman of Chainbow.

‘There has always been talk about the north south divide and throughout recent years I believe that London has emerged as a completely different market to the rest of the UK so why are the lenders not capitalising on this? The buy to let lending products currently available are not doing enough to foster investment but if there could be a capital centric mortgage criteria, this could help bolster the industry,’ he explained.

Berkeley Way managing director, Alexandra Reeves, echoed Southam’s perception. ‘In London, nothing much knocks demand. The credit crunch restricted British investors but these were supplemented by foreign investors from Russia, China, and the UAE. Demand in London is always constant and its population continues to be transient so there will always be a certain level of demand from renters. In addition, London offers more job security, pay rises and spending confidence in comparison to the regions,’ she said.

The survey also found that regional respondents want to pay their agents on a performance based fee arrangement while Londoners just want a fixed, all inclusive deal.

When it comes to appointing an agent, pricing is only a small consideration for 11%, while 31% said experience was important and 29% said reputation was the most important factor.

Owners in the regions are more likely to hire lettings agent (36%) than Londoners (13%). Londoners are more price sensitive and less likely to use a lettings agent but 63% are ‘sometimes’ influenced to purchase residential property because of their agent while 67% of the regional respondents are definitely not influenced by their agent.

This could mean London letting agents have to work harder for their fee but have more influence on their clients than the regions.