2008 rental demand “extraordinary”

Demand for rental property dipped slightly in October, with the number of leases commencing, down 2.35% on September, according to lettings agent Your Move.

The Your Move Rental Demand Index uses two-month rolling averages to measure demand for lettings in the UK and since the index cut-off date, Your Move has tracked a recovery in demand. The most recent weeks’ figures reveal the number of renters beginning new leases is up 6% from September 2008.

Managing director of Your Move, David Newnes, said: “The minor slowdown in demand for let accommodation in September was sparked by the global interest rate cut and resulting confidence boost – our sales side saw a small lift. But rental demand overall this year has been extraordinary – this is the busiest we’ve ever been in lettings.”

Demand for rented accommodation is growing strongly year on year, with the number of new leases beginning 53% higher than in October 2007.

Newnes added: “People don’t stop needing a roof over their heads because there’s a credit crunch. But the screws are tight in the mortgage market. We’re convinced the boom in demand for rented homes is a direct result of the lack of mortgage finance available. Despite the 1.5% cut in the base rate, you have to remember there are only 2,000 mortgage products on the market today compared with 16,000 this time last year and it’s all the best deals that have been pulled. People who would normally buy, are renewing their leases and staying put in rented accommodation until the market stabilises.”

Rents down as supply increases

Rents dropped across the residential lettings sector during the last quarter due to the increase in unsellable properties put onto the rental market.

The latest RICS Lettings Survey reports that the net balances of surveyors reporting new instructions to let both flats and houses (an indicator of supply) are now at historical highs.

50% and 68% more Chartered Surveyors reported a rise than a fall in new instructions to let flats and houses respectively.

The influx of supply onto the market has forced downward pressure on rents. The net balance of Chartered Surveyors reporting rises or falls in rents fell from a positive 31% in Q2 to a negative -12% in Q3, the lowest level in the survey’s history.

London and the South East have been hardest hit with the net balance of surveyors reporting rises or falls in rents for London houses falling from a stable 0% in the second quarter to negative -53% in the third quarter, while flats fell from a positive 5% to a negative -33%. However the biggest turn around was in the South East, with the net balance of surveyors reporting rises or falls in rents for houses plummeting from 53% to -33%. Equally, expectations for future rises in rents turned pessimistic for the first time since July 2002.

Demand for rental property remained positive in Q3. Housing transactions are at the lowest level since records began as banks continue to limit the availability of finance to the vast majority of buyers. 27% more Chartered Surveyors reported a rise than a fall in rental demand compared to 36% in the previous quarter.

RICS says the falling pace of demand can be attributed to the fact that many have now accepted their lot in the current climate and are sitting tight until the housing market picks up.

RICS spokesperson James Scott-Lee said: “The lettings sector has witnessed a boom in 2008 as sales in the housing market continued to slow. Many have been able to take advantage of rising rents to secure good returns. However, the market place has become more and more competitive as many vendors have been forced to become amateur landlords, creating an inevitable downward pressure on rents where supply has matched demand. With national average house prices set to weaken in 2009, yields may increase for those investors who can provide the right product for the right market place.”

Boom time for the lettings market

The rental market has performed well as housing sales in July diminished, according to the latest RICS Lettings Survey. New instructions (an indicator of supply) to let 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.

43% more Chartered Surveyors reported a rise than a fall in landlord instructions compared to 30% 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% and 39% more Chartered Surveyors reporting a rise than a fall respectively. 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.

37% more Chartered Surveyors reported a rise than a fall in tenant lettings, up from 30% in the last quarter. Demand for family homes remains stronger than for flats. Many would be buyers have been forced to rent as the route to mortgage finance has been blocked. 43% more Chartered Surveyors reported a rise than a fall in demand for houses compared to 34% Chartered Surveyors who reported a rise in demand for flats.

Rents have continued to rise while house prices fall, driving gross yields upwards. 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, the lowest level on record from 4.2%. Rental expectations fell slightly with some surveyors expecting over-supply to push rents downwards in the next quarter.

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 buy to let 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.”

Rental demand rockets 76% in July

A weak housing market continues to fuel a letting boom, as demand for rented accommodation in July grew by 76% year on year, according to Your Move. The UK letting agent says lease commencements were up by 18% in July 2008 compared to July last year, as thousands of would-be buyers scrap plans to get on the property ladder.

Meanwhile, the number of leases commencing January to July 2008 in total is up a huge 41% on the same period in 2007.

Compared to a normal year in which rental demand sees seasonal fluctuations, 2008 has seen continuous growth, Your Move says.

David Newnes, managing director of Your Move estate agents, comments: “The mortgage famine has pushed a huge number of buyers out of the market – they’re choosing to rent until the market returns to normality.

“Demand for rented accommodation has exploded; July’s massive uplift is the biggest this year. Normally summer sees a natural slowdown as people holiday rather than move house, but this year is bucking the trend.”

Newnes believes the huge boost in demand is being supported by the large number of properties coming onto the letting market.

“A lot of sellers won’t accept depressed prices; instead they’re taking advantage of booming demand for rented accommodation and putting their homes up for rent.

“Even those who can get a mortgage can see the advantage of renting in the current climate. From here on, the question mark over stamp duty means buyers will hold out before they put in an offer until they know whether there’s a saving to be made.

“House prices are under pressure at the moment, and there’s scope for buy to let investors with collateral to get good deals to expand their portfolios.”

Demand for rental property soars

Latest figures from Your Move have shown that the demand for rental accommodation has grown 38% year on year to June.

Mortgage affordability has become further out of reach for many, while others prefer to wait until the effects of the credit crunch have eased. Landlords are seeing the highest demand for rental property in years.

Commenting, David Newnes, Director of Your Move estate agents said: “There has been a stellar rise in the number of people looking to rent since the credit crunch began to kick in. The criteria banks and building societies use for deciding how much you can borrow have got a lot tougher. People who would have fallen into the first time buyer bracket a year ago are now renting.”