Sharp fall in tenant demand for flats

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by Gill Montia

The Royal Institution of Chartered Surveyors (Rics) has reported a sharp fall in demand for flats to rent over the three months to October, and attributes the decrease to a glut of properties on the market.

Having questioned its members, the Rics found that the number of surveyors who reported a rise in demand among flat seeking tenants over the three months had fallen to 17%. This compares with 37% in the previous quarter.

In recent years, the new-build flat market has experienced a boom and the Rics points out that the figures are consistent with recent anecdotal reports of a slowdown in the market.

While for the sector overall gross rental yields were unchanged, returns on flats fell for the fifth quarter in a row; gross yields on houses continued to rise.

The Rics survey reveals that the number of instructions received from new landlords across all types of property has almost halved over the past six months.

New instructions are a strong indicator of buy-to-let activity and as Jeremy Leaf, Rics spokesman, comments: “A combination of tightening lending criteria and successive interest rate rises has started to hit the buy-to-let market.”

The proportion of surveyors reporting an increase in the number of properties being offered for rent fell to 11%, down from 19% over the previous quarter.

The survey also reveals that the proportion of landlords choosing to sell properties when the lease expires has reached 6.5%, its highest level since mid-2005.

This figure could increase because new capital gains tax thresholds are due to be introduced in April of next year and according to Mr Leaf: “many landlords are resisting selling until the spring.”

Meanwhile, rents continued to rise, with 31% more surveyors seeing a rise than a fall.