Lettings sector on a high as rental demand soars

Published 01st Dec 2010

Dwindling supply of homes to let, coupled with increasing numbers of people looking to rent, boost rental prices


Demand for properties to rent increased at the fastest pace since 2008 in the three months to the end of October, while supply of new property to the lettings market fell for the fifth consecutive quarter, resulting in soaring rental growth.

The Royal Institution of Chartered Surveyors said 33% more surveyors reported a rise in rental demand than a fall, the fastest increase for over two years, with houses proving slightly more popular than flats.

The pick-up in demand for homes to let, coupled with the weaker supply coming onto the market, forced the rate of rental growth to its highest since the middle of 2007, with 39% more surveyors reporting seeing an increase in rents over the past three months, RICS said.

RICS spokesperson Jeremy Leaf said: "The lettings sector has become increasingly strong over the past nine months, in contrast to the housing market which continues to slow. Many have turned to renting because they fear further price reductions in the housing market, or because they cannot obtain the necessary finance to buy.

"As a result, rents continue to rise with supply failing to keep up with demand. However, there are increasing indications that more landlords are recognising these benefits and looking to add to their portfolios – especially as there has been a rise in the number of providers willing to offer investment mortgages in recent months."

The RICS findings echoed news released by the Spicerhaart Residential Lettings (SRL) group, which said the ongoing boom had led to its strongest ever rental market in recent months.

SRL lettings managing director Andrew Berry said: "It is unprecedented. Across all our divisions we have seen growing demand for a broad range of rental properties, from one-bedroom flats to family homes. Rents are soaring."

London and the south-east are among the areas seeing the largest increases in rent, Berry said. In Sutton, Surrey, the monthly charge for a semi-detached, four-bedroom furnished property increased from £1,475 to £1,800 in just five days last month and was let after its first viewing.

In Wimbledon, south-west London, the Haart residential lettings branch has seen the monthly rent on a two-bedroom maisonette increase by £200, in some cases. In Ealing, west London, a one-bedroom flat which was previously let for £1,200 per month recently went for £1,400.

"Tenants will have to fight harder to ensure they secure a property," Berry added. "In this market, the best piece of advice for anyone considering either renting or letting out a property is to research every aspect."

All of this may be good news for landlords who will reap ever greater returns on their investment, but it is not welcome news for tenants or first-time buyers.

Matt Griffith, who runs the PricedOut website, which campaigns for first-time buyers and cheaper housing, said the RICS figures are further evidence that renters are at the rough end of a "broken housing system".

He said: "The UK has one of the least secure and most volatile private rented sectors in Europe. Tenants have few rights, whilst investors have too often been speculating on capital gain, which produces increased house prices but precious few new homes.

"Renting now represents a substantial chunk of those in their 20s and 30s who, ten years ago, would have been first-time buyers. Renters are getting older and are finding it much harder to put down roots and start families. Planning for children when you don't know if you'll be in the same property in two months' time is not a good way to encourage family stability or security."

Griffith added that the government has long seen renting as a politically useful "buffer zone" in a dysfunctional wider housing market, yet the sector is failing to meet the needs of the priced-out generation. "More secure tenure rights would be a cheap and effective way for government to appeal to this growing and discontent demographic," he said.

Source: ' Guardian '

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