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Rental property 'to hold up'

10th June 2009 | back to article listings BACK    print this article PRINT

One of the recent trends seen in the property market that some have viewed as negative for buy-to-let investors has been the increase in the number of accidental landlords, people who would like or need to sell their house but cannot do so, either to move or because they are struggling to pay their mortgages.

What many such people have done is to take their homes off the market and make them available for rent, increasing the supply of private letting space and thus helping to push rental rates down. This, of course, has reduced yields for investors.

Earlier this week the Royal Institution of Chartered Surveyors (Rics) revealed in its latest survey that in the three months to May, the average number of sales per agent was 11.8, up from 10.6 in April. This was one of a number of recent indicators from Rics and others to show that since the start of the year, activity has picked up in the housing market. On this basis, it may be imagined, the temptation of accidental landlords to put their homes back on the market may be high, with the consequence that rental supply falls.

However, according to Fish4homes, the level of availability is likely to remain quite elevated. Head of sales Stewart Black said: "I think the rental market is being influenced by the for sale market and as enquiry levels have risen at their fastest level for ten years, it suggests to me that more people would like to buy than rent. However, that would not necessarily mean that rental property volumes will decline. If the number of assured shorthold tenancy (AST) is declining, then rental property availability will remain high."

Mr Black suggested that there are in fact now "very few" accidental landlords, since the Rics report still indicated an "extremely low" number of households. One reason for this, he suggested, is that the need for people to sell because their mortgages are hard to pay has been diminished by the base rate cuts of the last few months.

He concluded: "I think we will experience a period of flat rental prices, as I cannot see any external pressures to push demand up or down." Evidence that this may indeed be so came from the FindaProperty.com rental index for May, which found no changes in the average price since April. It was the first time since August 2008 there had not been a dip.

Such a situation could be good news for investors, who may welcome a period of stability after recent falls in rental rates, not to mention the general turbulence and uncertainty that has enveloped the property market in recent times.

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