Rents drop as unsold homes go to let
Rents are falling as unsold homes go up for rent
Tuesday, 18, Nov 2008 08:05
Rents in the last three months fell as the market become flooded with unsellable properties.
The Royal Institution of Charter Surveyors (Rics) lettings survey shows net balances of surveyors reporting new instructions to let both flats and houses (an indicator of supply) are now at historical highs - with 50 per cent and 68 per cent more surveyors reporting a rise than a fall in new instructions to let flats and houses respectively.
Rics members report frustrated sellers are placing their property on the market to let as they have been unable to agree sales due to a lack of demand in the housing market.
As a result rents were falling.
In the second quarter 31 per cent more surveyors saw rent rising, but by the third quarter 12 per cent more saw rents dropping.
Although rents fell, demand for rented property remained strong, as first-time buyers find the credit crunch means they can't raise a mortgage to buy and falling property prices dampen desire to buy.
Rics spokesperson James Scott-Lee said: "The lettings sector has witnessed a boom in 2008 as sales in the housing market continued to slow.
"Many have been able to take advantage of rising rents to secure good returns. However, the market place has become more and more competitive as many vendors have been forced to become amateur landlords, creating an inevitable downward pressure on rents where supply has matched demand."
He added: "With national average house prices set to weaken in 2009, yields may increase for those investors who can provide the right product for the right market place."
London and the south-east were hardest hit by the shift.
Mark Wilson, Rics member at Globe Apartments in London said: "Batten down the hatches. Landlords should expect rents to continue to fall as tenants' effective demand reduces.
"Added supply will add to the problem."
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