Rents set to rise: Primelocation

Posted on July 7, 2009 · Posted in Primelocation

Rents are on course to start rising again, according to the results of the latest Lettings Survey from the Royal Institution of Chartered Surveyors.

 

More willingness to sell

 

Most surveyors still expect rents to continue falling for a while, but the proportion expecting to see further falls is reducing, while those expecting a rise is increasing.

 

One of the strongest indications of future rises in rent levels is a greater willingness by ‘accidental landlords’ to sell their properties at the end of the current rental period.  This should lead to fewer homes available for rent.

 

There is also an increase in those seeking to rent, though the numbers have begun levelling-off. 

 

The impact of these trends varies across the country.  In London, rents are still falling, with tenants in a stronger position when negotiating with landlords.  In Scotland, too, there are far more reports of rents rising than falling. 

 

Yields suffer

 

RICS reports that, on average, rents are now declining at a faster rate than house prices, leading to a reduction on gross property yields.

 

Jeremy Leaf of RICS says: “Property transactions are starting to rise from very low levels and the influx of supply in the rental market has slowed as vendors begin to find buyers. Demand for rental property is still high but tenants have been able to take advantage of a flooded market to negotiate lower deals. Even so, the downward pressure on rents should ease in the coming months – providing some good news for landlords.”

 

Rental turnaround

 

The trends noted by RICS are reinforced by the latest Rental Index published by findaproperty.com.  Rents increased in June for the first time since August last year, according to the survey results.

 

Average asking rents rose by 0.5% in June, though they are 5.3% below asking rents of a year before.  Average rentals are now £823 per month.

 

Supplies of properties for rent dropped in June at a similar rate to the increase in asking rents.  The 0.4% fall in supply is the first  in 18 months.

 

In London, asking rents are now £1,625 per month, having fallen by 0.3% – after rising by 0.4% the month before.  Rental yields across the country remained stable, at 4.56% – 5.24% on flats and 4.33% on houses.

 

Sustained recovery

 

“There are some signs of a sustained recovery in the UK rental market and we are encouraged to see asking rents rise again and supply levels fall for the first time in 18 months,” says Andrew Smith, head of research at findaproperty.com. 

 

“However, it is far too early to say that we are out of the woods yet and the UK rental market remains very sensitive to changing economic conditions.  We would not be surprised to see an ongoing relationship between asking rents and supply levels over the forthcoming quarter as the market tries to find its level.”