September 2008

Lettings up as credit crunch shows no sign of letting up...

THE rental market is booming as housing sales diminish, according to the latest lettings survey from the Royal Institution of Chartered Surveyors.

New instructions to let in July increased at the fastest pace in the survey’s history as many would-be-sellers found that becoming a landlord is a better option than selling in the current climate.

Forty three per cent more chartered surveyors — members of the RICS — reported a rise than a fall in landlord instructions compared to 30 per cent in the previous quarter.

Equally, both new instructions to let houses and flats increased at the fastest pace in the survey’s history with 47 per cent and 39 per cent more surveyors respectively reporting a rise than a fall.

Accorording to the RICS, surveyors report that 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.

Thirty seven per cent more members reported a rise than a fall in tenant lettings, up from 30 per cent in the last quarter.

Significantly, demand for family homes remains stronger than for flats, according to the report.
With many would-be buyers forced to rent as the route to mortgage finance has been blocked, 43 per cent more chartered surveyors reported a rise than a fall in demand for houses compared to 34 per cent who reported a rise in demand for flats.

Rents have continued to rise while house prices fall, driving gross yields upwards, say the RICS.

Rising profits have kept landlords committed to the market. The proportion of landlords opting to sell at the expiry of the tenant lease fell to 2.1 per cent, the lowest level on record from 4.2 per cent.

Rental expectations fell slightly with some surveyors expecting over-supply to push rents downwards in the next quarter.

James Scott-Lee, chairman of Chancellors Estate Agents, speaking on behalf of the RICS, said: “The lettings market is booming with many vendors opting to rent their property while sales in the housing market continue to dry up. Many are willing to ‘hold’ and await the return of capital appreciation.

“Becoming a landlord is now an increasingly profitable option with rising rents and yields offering good returns.

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

“However, ever-increasing supply could have an impact on rental growth as tenant options increase.”