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20th April 2011

Rental market sees increase in higher value properties

The beginning of 2011 saw an influx of higher value property into the private rented sector, according to the latest research from the Association of Residential Letting Agents (ARLA).

Research for Q1 2011 shows an 11.6% increase in the average capital value of rental houses, from £401,400 to £447,900. Previously, this figure had declined following the last market peak at £442,600 in 2007.

This growth was driven by London and the South East, with a 14.8 per cent increase in average capital value in central London and 16.2 per cent in the rest of the South East. The rest of the UK experienced a drop (5.2%). According to ARLA, this growth is due to an increase in family homes coming onto the rental market, which generally carry a higher value than smaller homes.

Ian Potter, operations manager of ARLA, said: "We believe that this increase in the overall average capital value of rental properties has been driven by different types of home being offered to let. Today's housing climate and uncertainty around jobs and income means many people are choosing to let rather sell their home, causing an increase in the number of family-sized homes available to rent."

ARLA's research shows that, of the 39 per cent of ARLA members reporting an increase in property coming onto the market because it could not be sold, the biggest proportion was for family-sized homes, with 66 per cent reporting an increase in semi-detached and 63 per cent reporting an increase in detached houses.

Mr Potter added: "While these changes do not necessarily mean individual properties are worth more money, they do indicate that there is increasing flexibility in terms of the types of property available to would-be tenants in the private rented sector.

"The recent expansion of the private rented sector for those unable to buy reinforces the need for greater institutional investment, which was acknowledged in the Budget through the Chancellor's amends to REITs and Stamp Duty on bulk purchases. The Government must recognise however that these investors see consumer protection as paramount to protecting reputational risk, and so regulation is urgently required if there is to be an influx of landlords into the sector."