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Online House Hunter: The shape of the rental market

Alan Cleaver
squeeze 300x200 Online House Hunter: The shape of the rental market

The squeeze on the housing market is having an effect on the rental market

THE vagaries of the housing market continue to skew the rental market, particularly in London and the South-East.

The overheating of the rental market in the capital city and suburbs has resulted in tremendous demand for houses to let, particularly at the lower end of the scale. But now it’s also causing a bulge in the top end of the market.

The latest research from the Association of Residential Letting Agents reveals an influx of higher value properties into the private rented sector.

ARLA’s research for the first quarter of 2011 shows an 11.6 per cent 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. Interestingly, the rest of the UK experienced a drop (5.2 per cent).

According to ARLA, this growth is due to an increase in family homes coming onto the rental market.

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.”

The property sales market’s loss is the rental market’s gain. If you can’t sell your house or can’t sell it for the price you believe it is worth at the moment, then letting it for some months or years must seem a good option: particularly if you’re in the London area where demand for rental homes is so high.

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.

Meanwhile, restrictions on mortgage finance and low consumer confidence is driving fierce competition for lower cost rentals across London and resulting in a severe shortage of homes to let in the region of £250 – £400 per week, Cluttons reveals in its current Residential Property Forecasts.

Cluttons say that while around 40 per cent of tenants are seeking property at this price level, only 15 per cent of the available stock is priced under £400 per week.

Across the whole market, Cluttons forecasts an increase in rental values of two to three per cent in 2011. In 2010, landlords were achieving considerable uplifts in rent when contracts were renewed, but the rate of increase has slipped back in 2011 – perhaps due to landlords responding to tenants’ fears over job security.

Lynn Hilton, Partner for Residential Lettings at Cluttons, said: “Tenants are considerably more cost conscious than they were even a year ago, as it becomes apparent the economic recover will be slower than expected. Relocation agents too are working to much smaller budgets, typically £250 – £400 per week, which is contributing towards a bottleneck in the market at this level where supply is at its lowest. This means some tenants are having to seek property outside of London’s prime areas.”

USEFUL LINKS

Our Online Property Search Engine – which includes properties to let

Association of Residential Lettings Agents

National Landlords Association

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  • dave_harrison

    It’s inevitable that as house prices increase, and in particular the amount required for a deposit increases more people will look to rent. The simple economics of supply and demand means that landlords will be able to charge more for their properties inflating the market value.

    It’s not just London where the rental sector is blooming, it affects other major cities too such as Leeds and Manchester, just have a look here http://www.one-uk.co.uk

    There are still some bargains to be had, but people need to be flexible and accept they might not get their ideal property on their budget.


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