Sales slump pushes property back into the lettings market

Submitted by on Fri, 23.05.08

RICS residential lettings survey Q1 2008

 

New instructions to let property have increased significantly during the first quarter of 2008, as those homeowners experiencing difficulty in selling their properties turn to the rental market to take advantage of rising yields, says the RICS Lettings Survey published today (Thursday 22 May 2008). 

The net balance of Chartered Surveyors reporting a rise in new landlord instructions (an indicator of supply) increased to 29 percent compared to -2 percent in the previous quarter. A significant drop in demand in the housing market has pushed sellers back into the rental market, and many are taking advantage of rising rental yields while they wait for the effect of the credit crunch to abate.  Landlords are reaping the benefits of a collapse in demand in the housing market with 23 percent more Chartered Surveyors reporting a rise in gross yields - up from 5 percent last quarter.  

In the North, tenant demand increased at the fastest pace since July 2007, with new instructions to let property increasing at the fastest rate since January 2003.  Rents also increased at the fastest pace in the survey’s history and the jump in rental expectations experienced in this area is a sure indication of the buoyancy of the market.

 

Surveyors report that rents are still rising and rental expectations remain at more than double the survey’s long run average, and the North East is one of a number of key areas of significant rental growth.

RICS North East spokesperson Richard Sayer, a partner in Rook Matthews Sayer, commented:  “The sales market’s loss is the lettings market’s gain. While property management has always accounted for a significant amount of the Rook Matthews Sayer business, it’s now being viewed as an attractive additional arm for many other North East estate agency businesses.  

“At the moment, landlords can continue to enjoy this increasingly lucrative market, particularly as fears that a change in capital gains tax would bring a new wave of sellers, have not come to fruition.” 

National RICS spokesperson James Scott-Lee added:  “Some would-be sellers are retreating from selling and letting or re-letting their properties as they wait for mortgage lenders to offer buyers more favorable lending criteria. While transaction numbers in the sales market are weak, many are taking advantage of rising rents and yields in the private lettings sector.”