Assetz® News - Property rents are rising very strongly

Property rents are rising very strongly

16th October 2007 |

I think a few people missed this important comment when it was part of a previous market analysis blog so I have extracted this extremely good news regarding long overdue rental growth :

When I dared to suggest that rentals were rising early this year most people scoffed and said it was wishful thinking, or perhaps I had a vested interest. They were right on both counts but my vested interest put me close to the market and I was seeing what every landlord was wishing for, the first indications in hearsay and one-to-one conversations that rents were beginning to go one way and that was up.

The RICS (Royal Institute of Chartered Surveyors), not normally known for its bullish and forthright opinions has just gone on record saying “surveyors expect rents to reach record growth rates in the coming months”. It also said that “rental growth reached record levels” and even that “Surveyors expect a surge in rental growth for flats into the Autumn as a more cautious climate among first time buyers sets in.”

See these quotes in print on their website or in their latest lettings report :

www.rics.org/Property/Residentialproperty/Residentialpropertymarket/lmsq2_2007_110907.htm

www.rics.org/NR/rdonlyres/2F17F78E-CA5E-40F0-977D-548B744879B9/0/Lettings_Q2July_2007PDF.pdf

In addition, ARLA also reported in June “Demand for rented properties seriously outstripped supply and rent levels rose” www.arla.co.uk/news/110607.htm and in fact in their September press release (http://www.arla.co.uk/news/100907.htm ) say “Tenant demand now outstrips supply in all areas of the rental market”.

Our own view is that rents will be seen to have risen across the country at around 10% in 2007 (and a lot more in many areas, one of my properties in Runcorn went up 30% at the last tenant change) and a further 10% growth in 2008 with further strong growth after that.

I pondered some months ago about how house price inflation was running away with itself whilst rentals stagnated - I had a few theories then about why this was and it would appear that one of those theories was correct and that property supply was only slightly keeping ahead of rental demand but not enough to keep ahead of purchase demand - however this was enough to keep the lid on rental growth. Now we see one hint of first-time buyers delaying their purchases and deciding to rent on their own rather than live with parents or continue to live in shared properties and we see the supply/demand imbalance switch the other way round and rents are now starting to take off dramatically. We had this previously in the early 1990s and it looks to me like we're going to see several years of strong rental growth to come. As ARLA said in the above September press release “when house prices soften, demand for rented accommodation rises” and “the traditional rental cycle emerges as house prices soften.”

Good times indeed for landlords.