Rental market sees demand soar

Over the past year the demand for rented accommodation has soared by 50%, according to the UK lettings agent Your Move. Due to the turmoil in the financial markets and tightened lending conditions, more and more buyers are postponing their move on to the housing ladder and remaining in rented homes for longer than they have in the past.

[ClickPress, Fri Oct 24 2008] Over the past year the demand for rented accommodation has soared by 50%, according to the UK lettings agent Your Move. Due to the turmoil in the financial markets and tightened lending conditions, more and more buyers are postponing their move on to the housing ladder and remaining in rented homes for longer than they have in the past.

The Your Move survey shows that the number of leases commencing in September rose 4.3% from August, and in the preceding nine months the number of people opting for rentals rose 45% over the same period last year. In parallel, the number of mortgage advances is at an all-time low, despite the Bank of England’s cut in the base rate two weeks ago. Mortgage rates have been raised by several banks and building societies this month, with Nationwide being the latest to increase its rates on its tracker mortgages.

As the market experiences the strongest ever tenant demand, there has been an increase in the supply of rented homes, as more owners are choosing to rent their property rather than sell at a time of falling prices. “A great many people who were going to put their property on the market now find themselves in the role of private landlord,” said Lawrence Smith of Decision Homebuyers. “With a degree of compromise on their selling price, however, they can avoid this by making a guaranteed sale of their property to a home-buying company, which will free them up to make the next move.”

As a result of increased supply, rents are expected to grow this year at a much lower rate than in 2007 – about 2% compared to 7.5%, according to estate agency Knight Frank. In London, which has seen the greatest increase in the supply and quality of rentals, prices have fallen over the past few months. Knight Frank predicts a 2.3% fall in rents in London this year, before they start to rise again by 3--4% next year.

It is expected that rental demand will continue to grow for the next 18 months at least, irrespective of the fall in house prices. The property website Hometrack estimates that even if property prices fall 20% that would only allow around 600,000 young buyers to get on the property ladder, out of an estimated 1.6 million 20- to 39-year-olds who are renting.






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