Rents continue to decline but outlook brightens

Permalink: Rents continue to decline but outlook brightens
by Gill Montia

In its latest lettings market survey, the Royal Institution of Chartered Surveyors (Rics) found that growth in demand for rental property slowed in the three months to April, as did new landlord instructions.

During the first quarter of 2009, 55% more surveyors reported a fall in rents than a rise, which is the most negative reading since the survey began in 1999.

Sixteen per cent more surveyors reported a rise in new tenant lettings than a fall, which compares with 42% in the previous three month period.

Meanwhile, 23% more surveyors reported a rise in new instructions.

The study also revealed that rents continued to decline but rental expectations suggested the trend is set to ease.

A net balance of –25% Rics members anticipated further rental declines compares with a reading of –41% for the previous three month period.

The percentage of landlords planning to sell properties at the expiry of leases remained at historically low levels, despite edging up slightly to 1.8% from 0.2% in the three months to January.

However, surveyors reported that gross property yields were falling for the first time since April 2007, indicating that rents are declining at a more rapid pace than house prices.

In terms of property type, demand for houses increased at a faster pace than for flats and landlord instructions increased at more or less the same pace.

As a result, rents for houses fell at a slightly lesser pace than for flats, while rental expectations for houses were also less negative.

In England and Wales, the London market was the weakest with gross yields, rents and tenant demand falling faster than in any other region.

The North was the best performing region, with rental falls relatively subdued, “firm” tenant demand and rising gross yields.

The Rics described the market in Scotland as “relatively weak”.