Sharp increase in demand for rented property

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by Lin Freestone

The UK’s second largest lettings agent, Your Move, has reported that there was a 4.34% rise in the number of leases that began in September, when compared with those taken up in August.

In the nine months to September 2008, the number of people moving into rented accommodation rose by 45%, compared with the same nine-month period in 2007.

The lettings market is thriving across the UK, directly as a result of the increased difficulty in getting a mortgage. Potential buyers unable to get on the property ladder are staying in rented properties for longer than they have in the past.

Your Move has seen the strongest tenant demand it has ever had, far beyond normal seasonal fluctuations. According to the group, although the supply of rented properties is increasing due to people who are unable to sell their homes opting to rent them instead, this is being met by a flood of demand, which is helping to keep rents firm.

Knight Frank, the estate agency, expects rents in the UK to grow by about 2% this year because of the extent of new supply. This is significantly slower than the 7.5% rental growth experienced in 2007.

David Newnes, managing director at Your Move, has said that as a result of expensive mortgage finance, people are choosing to rent. But in spite of the larger number of rental properties coming on to the market, as disillusioned sellers become ad hoc landlords, potential buyers are picking up the slack.

He said that they are biding their time in the hope that they will bag a bargain when the market bottoms out. With demand consistently strong, landlords could clean up.

When questioned in September, more than 75% of landlords targeted by the Association of Residential Lettings Agents indicated that they would not sell their investments because of falling house prices. Instead, they expect to keep their property portfolios for an average of 16 years. A further 25% intend to hold their investments for more than 20 years.

Hometrack, the housing intelligence company, has estimated there are 1.6 million 20 to 39-year-olds who are renting because they cannot afford to buy a property. A 20% fall in house prices would still open the market up to only 600,000 young buyers.