29/11/2007

Tenant demand in the private rented sector at highest levels for five years

Tenant demand in the private rented sector remains at the highest levels seen for five years. This has led to an increase in rents achieved, according to the latest quarterly survey of member letting agents, recently published by ARLA. Two thirds of the letting agents in prime central London report they have more tenants than there are properties available to rent. This is echoed throughout the South East, where the same lack of property is reported by 57% of the letting agents. In the rest of the country, 37% are reporting rental property shortages. The most dramatic turnaround in the balance between supply and demand between prospective tenants and available property is reported in Prime Central London. There, the increase in demand over supply has increased thirteen fold in the past five years. In the rest of the South East, demand has risen six fold and has remained relatively static in the rest of the country. The ARLA Survey of Letting Agents is based on responses drawn from 517 letting offices. This makes the survey the largest and most authoritative of its kind in the private rented sector.

"This peak demand should come as no surprise," said Ian Potter, Head of Operations for ARLA. "It has been driven up by the many competing demands for rental accommodation and now we have softening house prices. Softening in the sales market is always a driver of further demand in the rental market."

The ARLA Survey shows that achievable rent levels have been increasing over the past six months. Rent levels throughout London and the South East are considered to have risen very significantly, with the majority of letting agents reporting increases. Elsewhere in the country, up to 54% of all letting offices report increased rents achieved.

Tenants continue to stay in properties for well over a year, regardless of the length of their initial agreement, which is commonly for six months. Void periods remain at well under a month. This decline in the length of time properties are empty has been declining steadily from an average of nearly five weeks.

Said Ian Potter, "These latest figures confirm that the private rented sector will once again be the safety valve for a housing market worried by the current financial uncertainties and the softening of house prices. It is the rental market that houses the massive numbers of immigrants, the increase in single households and more students in higher education."

Meanwhile, more than seven out of ten letting agents report that the latest survey shows investment landlords are marking time before making buying or selling decisions. As a result, the proportion of investment landlords who are selling has fallen from 21% to 16% and buying from 16% to 11%.

This pattern was last seen in 2004/5 before the proportion increasing their investments rose rapidly in 2006.

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