UK housing slump 'forcing homeowners into rental market' » Housing » 24dash.com

The housing market downturn is forcing increasing numbers of homeowners to rent out their property because they are unable to sell it, figures showed today.

The Royal Institution of Chartered Surveyors (RICS) said instructions to let properties increased at their fastest pace since its survey began during the three months to July.

Overall 43% more chartered surveyors reported seeing a rise in the number of new landlord instructions than those who saw a fall, up from 30% during the previous quarter.

The group attributed the jump to frustrated sellers opting to become landlords after being unable to sell their home in the current market.

It added that the credit crunch and housing market downturn had also boosted demanded for rented property as people either delayed buying somewhere or were unable to obtain the mortgage they needed to do so.

Tenant demand rose at its fastest rate since 1998, with 37% more chartered surveyors reporting an increase in lettings than those who saw a fall, up from 30% during the previous quarter.

The group said demand for family homes was particularly strong, with 43% more surveyors reporting an increase in the number of house lettings than those who saw a fall, compared with 34% more who reported a jump in demand for flats.

Rents continued to rise during the three months, and this combined with falling house prices, helped to boost the yields buy-to-let investors made on their properties.

As a result of rising yields, increasing numbers of landlords are opting to stay in the market, with just 2.1% selling their properties when rental agreements ended, the lowest level since records began in 2003.

But despite the strong level of demand for rented property, chartered surveyors expect rents to fall slightly during the coming quarter, pushed down by oversupply in the sector.

RICS spokesperson James Scott-Lee 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."

Seema Shah, property economist at Capital Economics, said: "The latest RICS lettings survey provides evidence that demand for rental accommodation has strengthened as fewer potential homeowners are willing to commit themselves to a falling market and as the mortgage credit squeeze has curtailed purchasing power.

"At the same time, against the backdrop of soft demand, the survey suggests that fewer landlords are willing, or even able, to sell their property."

Meanwhile estate agent Cluttons said it was already beginning to see rents in London dip as the supply of property overtook demand.

It said during the past month rents had fallen by up to 5% in South Kensington, Chelsea and Knightsbridge, where the supply of property has doubled compared with the same time last year.

Amelia Greene, partner for lettings at Cluttons' South Kensington office, said: "The struggling sales market has fuelled a mini boom in lettings, but we are now starting to see rents dip across the board, as the number of new tenants coming to the market levels off.

"To prosper in the current conditions, landlords must have realistic expectations regarding rental income and steer clear of void periods at all costs.

"A number of 'accidental landlords' who have come to the market reluctantly after failing to sell their property, are refusing to budge at all on the asking rent, instead settling for void periods which professional landlords know are seriously detrimental to yields."