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Rents rocket as demand far outstrips supply
Surveyors seeing an increase in rents has hit its highest level in three years, on the back of falling supply and leaping demand, according to the Royal Institution of Chartered Surveyors (RICS).
RICS figures showed that 39% more surveyors have seen an increase in rents over the past three months than a fall, the highest level since Q2 2007.
In addition, demand for rental property continues to be very strong, with 33% more surveyors reporting a rise than a fall in demand during the quarter, the biggest jump since 2008.
RICS said that difficulty in securing mortgage finance and the high deposits required by lenders have forced more prospective buyers to rent. This has lead to properties being let very quickly and landlords experiencing very few voids.
New landlord instructions, a good indication of supply to the market, have slipped further, marking five consecutive quarters of falling instructions.
RICS also found that difficulty in securing buy-to-let mortgages was holding back many would-be landlords and a fresh supply of property from entering the market.
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Meanwhile, renewed falls in the sales market saw fewer existing landlords choosing to sell their property at the end of a tenancy agreement. The proportion intending to do so declined from 4.1% in the three months to July to 2.5% in the three months to the end of October. This was below the survey average of 4.4%.
Jeremy Leaf, spokesperson for RICS, said: “The lettings sector has become increasingly strong over the past nine months, in contrast to the housing market which continues to slow.
“Many have turned to the rental market because they fear further price reductions in the housing market, or because they cannot obtain the necessary finance to buy. As a result, rents continue to rise with supply failing to keep up with demand.”
However, he added: “There are increasing indications that more landlords are recognising these benefits and looking to add to their portfolios, especially as there has been a rise in the number of providers willing to offer investment mortgages in recent months.”
Matt Hutchinson, director of Spareroom.co.uk, said: “It’s not unusual for the rental market to see a spike in demand or supply levels. What is unusual is that we’re seeing stock levels dry up at the same time as demand levels are spiking, and this is creating a widening and unsustainable disparity between the number of rooms available and the number of people looking for rooms.
“The crisis facing the rental market has also been exacerbated by the first-time buyer market drying up, resulting in rental stock being tied up that would normally come back onto the market. There is also a drastic shortage of student accommodation which means areas heavily populated by students, such as London, are suffering.”