Falling supply of new property to the rental market coupled with increased demand led to a rise in rents in the three months to the end of October, says the latest RICS Residential Lettings Survey published today (December 1, 2010).
39% more surveyors reported seeing an increase in rents over the three-month period, than a fall (up from 27%). The net balance reading is now at its highest level since Q2 2007 as increasing numbers turn to the rented sector. Many are seeking to rent rather than buy due to difficulty in securing mortgage finance and the high deposits required by lenders.
As a result, surveyors report the rental market remains buoyant, with properties being let very quickly and landlords experiencing very few voids. Demand for rented property continues to be very strong, with houses being slightly more popular than flats. 33% more surveyors reported a rise in demand than a fall, the fastest increase in demand since 2008.
New landlord instructions - a good indication of supply to the market - slipped further, marking five consecutive quarters of falling instructions. Respondents report that difficulty in securing buy-to-let mortgages is holding back many would-be landlords, and a fresh supply of property entering the market. Meanwhile, renewed falls in the sales market saw fewer existing landlords choosing to sell their property at the end of a tenancy agreement. The proportion intending to do so declined from 4.1% in the three months to July to 2.5% - well below the survey average of 4.4%.
Across the UK, London saw the biggest increase in rental prices, with a net balance of +86 - the highest number in the series history. A turnaround occurred in the North, where the net balance improved from -3 to +23 but all regions are now recording positive readings.
Looking ahead, the outlook for rents over the next three months remains very firm. 34% more surveyors expect rents to rise than fall, with the expectation that rents for houses will increase at a slightly faster rate than for flats.
RICS spokesperson Jeremy Leaf commented: "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 the rental market 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 recognizing 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."