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13th September 2011

Rents continue upward trend

A worrying level of undersupply continues in the UK private rental sector, with new tenant demand having pushed up rents yet again.

 

According to the latest Residential Lettings Survey from the Royal Institution of Chartered Surveyors (RICS), a balance of 34% more surveyors reported a rise in rents rather than a fall during the three months to July.

 

The proportion has fallen slightly from the previous three month period but the survey results suggest further gains in rents are likely during the remainder of 2011.

 

Would-be homeowners unable to secure a mortgage and potential first-time buyers burdened with saving for large deposits are the main drivers in the market, resulting in 25% more chartered surveyors reporting a rise in demand for rental homes, rather than a fall.

 

New landlord instructions are edging up but only modestly, with just 5% more respondents reporting a rise in new instructions than a fall.

 

Surveyors also reported that where tenancies are coming up for renewal, some landlords (particularly those in London and the South East) are opting to put their properties up for sale.

 

Other emerging trends include a rise in the proportion of tenants relying on housing benefit, with social lettings in the private rental sector now at their highest level since 1999, when the RICS began collecting figures.

 

Thirteen per cent of all new lets currently fall into this category.

 

Commenting on the findings, RICS spokesperson, James Scott-Lee, says: “The combination of strong tenant demand and a limited stock of good quality properties on offer are pushing rents ever higher across much of the country.”

He adds: “With mortgage finance for first time buyers likely to remain in short supply for some time to come, this imbalance is set to persist.”

 

The RICS research certainly supports the notion of a “dysfunctional” housing market put forward earlier this week by the National Housing Federation, which is forecasting a sharp drop in owner-occupier rates in the years to come.

For the those locked out of the housing market by strict mortgage lending criteria and house prices that could shoot up because of undersupply, options could be limited and increasingly expensive.

 

The Federation expects average private-sector rents to increase by 19.8% between now and 2016.