Residential rents are set to rise as accidental landlords sell as the UK property market improves, according to two new reports.
A survey from Rightmove, the UK’s number one property website for lettings, has found that over a third of people who will rent a property over the next 12 months expect prices in the rental market to increase, with just 7% believing that prices will fall.
The survey of over 35,000 people on the property market shows that 9% of renters believed prices would go up by over 10%, with a further 28% foreseeing price increases of between 1 and 10%.
And the latest Rental Market Report from the Royal Institution of Chartered Surveyors shows that surveyors expect rental prices will go up in 2010 due to increasing demand and a reversal of the oversupply witnessed over the past year.
The Rightmove Consumer Confidence Survey also found that 58% of people who will rent in 2010 would prefer to purchase a property but can’t afford to buy, with the highest proportion of this group found in the South East where 65% of renters can’t afford to buy. A further 28% of those who will be renting next year would like to buy but at a later date, and just 12% wish to rent long-term.
‘With sales prices now positive year-on-year across most of the country and low stock levels driving increased up values in many areas, 2010 may see many landlords cash-in by taking their properties off the rental market and put up for sale,’ said Miles Shipside, commercial director of Rightmove.
‘A limit in supply will exert further upwards pressure on rental prices. Demand for rental properties looks set to remain buoyant while property sales prices stay out of the reach of those tenants who would prefer to buy. On top of this, restrictive mortgage lending criteria looks set to keep many would-be buyers trapped in rented accommodation,’ he added.
The drop off in supply is the main driver for the more positive sentiment, with new instructions reaching their lowest levels since the RICS letting survey began in 1998. A net balance of 11% of surveyors are seeing the number of new instructions coming onto the market falling rather than rising, the report shows. This is in stark contrast to levels seen late last year when the housing market was still suffering from falling prices and many would-be sellers were turning to the lettings market when their houses failed to sell.
At the same time demand for rental property is still rising as 16% more surveyors saw activity over the past three months pick up, particularly demand for houses.
‘It seems the current upward trend in the housing market is having a more significant effect on the lettings market, with many of the accidental landlords returning to the sales market to take advantage of the recent price increases. As a result the recent oversupply is reversing, with new instructions at the lowest levels we have seen. This of course is impacting on prices and tenants no longer have as strong a bargaining power as they did,’ said RICS spokesman Jeremy Leaf.