Buy to let bonanza as rents set to soar.

Buy to let bonanza as rents set to soar.

14:36 PM, 27th October 2010, About 14 years ago

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Increasing tenant demand and a fall in the number of properties available to let are driving rents higher, says the latest letting market review from the Royal Institute of Surveyors (RICS).  

Tenant demand is strongest in London and the East but increased across all regions.

The figures based on data collected from letting agents for the three months ending July 31 showed demand rising above average for the second quarter in a row.

Problems finding a mortgage, worries over another fall in house prices and large deposits needed to secure home loans are leading to higher numbers seeking to rent rather than buy.

As a result, rents increased for the second consecutive quarter, with 27% more letting agents reporting a rise in rents than a fall.

A year ago the picture was different, as over supply pushed rents down and 29% more letting agents reported falling not rising rents.

Although interest rates are at a record low – making property a potentially attractive option for investors – difficulty in finding buy-to-let mortgages is contributing to the lack of supply of rental property.

New supply of property to the market remains low and has now fallen for four consecutive quarters, although at a slightly slower pace.

Landlords do not appear to be in any rush to dispose of their property. Only 4.1% told letting agents that they intended to sell their properties at the end of a tenancy agreement.

The outlook for rents remains positive. 33% more letting agents expect rents to increase over the next quarter rather than fall. Rents for houses are expected to marginally outperform flats.

Speaking for RICS, James Scott-Lee said: “Supply of lettings property continued to fall in the three months to July although at the slowest pace in a year which amid rising tenant demand has helped propel rents higher for the second consecutive quarter. Existing landlords keen to expand their portfolio may still be struggling to access the necessary finance despite improved market conditions.

“However, there is a possibility the lettings market could face a modest increase in supply in the coming months. The latest RICS Housing Market Survey shows a lack of funding has stifled demand from buyers which may cause some moderation to rents as more opt to let than sell.”

Link to full report and historical data.

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