Ripples in the rental market
Data released this week suggests that the number of properties up for rent has jumped recently 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.
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. That was up from a positive balance of 30% in the previous quarter.
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.
However, 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”.
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, although the picture is not straightforward.
