Supply of rental properties rises

Published 19th Aug 2008

The number of properties up for rent has jumped as people who cannot sell their homes decide to let them instead.

The Royal Institution of Chartered Surveyors (Rics) says the slump in house sales is forcing many more people to become either landlords or tenants.

In July, Rics members saw new instructions from landlords rise at their fastest rate on record.

But potential tenants are outweighing would-be landlords, and helping to push up rents in many areas of the UK.

The international credit crunch and the subsequent drying up of finance for new mortgages has produced the sharpest housing market slump seen since World War II.

The number of house sales has already fallen by 50% in the past year and with mortgage approvals already down by 70% it looks likely that sales will fall even further in the coming months.

"Frustrated vendors have been placing their property in the market to let as they have been unable to agree sales due to a lack of demand in the housing market," said Rics.

"Many would-be buyers have been forced to rent as the route to mortgage finance has been blocked," it added.

More lettings

According to the Rics survey of residential lettings, 43% more of its members reported a rise in landlord instructions than saw a fall during the three months to July.

Actual lettings also went up strongly, with 37% more surveyors reporting a rise than a fall in lettings to tenants.

Meanwhile 43% more surveyors reported a rise than a fall in the local demand for rented houses, compared with a balance of 34% in the demand for flats.

Many potential buyers, finding it hard to get a mortgage, are now renting rather than buying new homes, with family houses especially in demand.

The knock-on effect has been that rents have continued to rise, even though house prices are falling.

The Rics findings contradict those of some other recent rental surveys.

These have suggested that in fact new properties coming onto the rental market have outnumbered the increase in potential tenants.

The property firm Knight Frank has predicted that rents in central London may fall by up to 5% this year because of an oversupply of "forced landlords".

Warning

Landlords are now more inclined to keep hold of their rental properties, the Rics survey found, with only 2.1% opting to sell when their tenants' leases expired, the lowest proportion on record.

"Established investors have been reaping the benefits of the housing downturn for sometime and will continue to do so in the short term," said Rics.

"However, ever increasing supply could have an impact on rental growth as tenant options increase," it pointed out.

Demand from prospective tenants appears to be strongest in the North of England, while new instructions from landlords are strongest in the Midlands and Wales,

"Demand for rented accommodation is strong," said Malcolm Parker of Joplings estate agents in Thirsk.

"A major factor in recent weeks is that many unsold houses are being withdrawn from sale and offered for rental instead," he added.

However the picture is not uniform.

"There is an oversupply of rental property in the market due to property owners, unable to sell their properties, attempting to let them," said Shoulers estate agents in Melton Mowbray.

"We see this trend continuing," they warned.

Source: ' reuters '

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