Rental demand up by 50 per cent in the UK

Buy-to-let investors have reason to cheer with rental demand on the rise as first-time buyers stay away.

By Paul FarrowLast Updated: 1:32PM BST 22 Oct 2008

The number of people signing up for rented accommodation rose in September, with demand up 50 per cent year on year, according to the UK's second largest lettings agent Your Move, which has 250 branches nationwide. The number of leases commencing in September jumped 4.34 per cent compared to August 2008 - far beyond normal seasonal fluctuations, the agent added.
Your Move said that has the increase in demand coincided with mortgage advances being at an all-time low, it indicated that would-be buyers are renting rather than buying property. It is estimated that there are 1.6 million 20 to 39-year-olds who are renting because they cannot afford to get on the property ladder, according to Hometrack, the property data company. A 20 per cent fall in house prices would still open the market up to only 600,000 young buyers.
The increase in demand will be a fillip for novice landlords. They have been dealt a bitter blow with record levels of buy-to-let loans being withdrawn from the market in recent months. Those that have remained are almost half a percentage point higher potentially adding hundreds of pounds to a monthly repayment.

Managing director of Your Move, David Newnes, said: “As banks stopper the bottle of mortgage finance, potential buyers have to stay in rented homes for longer than they have in the past. The lettings market is thriving across the UK – we are seeing the strongest tenant demand we’ve ever had, far beyond normal seasonal fluctuations.”

“Mortgage finance is still expensive – as a result, 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, would-be buyers are picking up the slack. They’re biding their time in the hope that they’ll bag a bargain when the market bottoms out. With demand consistently strong, landlords could clean up.”

Last month over three quarters of those questioned for the third quarter Association of Residential Lettings Agents Review and Index said they would not sell their investments because of falling house prices. Instead, they expect to keep their property portfolios for an average of over 16 years. A further quarter intend to hold their investments for more than 20 years.

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