27 August 2010

Residential property rents in the UK are increasing as tenant demand and a shortage of properties dominate a bullish lettings market.

More than 25% of chartered surveyors reported a rise in demand for property rather than a fall, which was the second consecutive quarter that lettings demand has risen at a pace above the long run average, says the latest Residential Lettings Survey from the Royal Institution of Chartered Surveyors.

Tenant demand increased across all regions, but was strongest in London and the East of England. With securing mortgage finance still posing great difficulty, worries over a double dip in housing and large deposits required by lenders are leading to higher numbers seeking to rent rather than buy, it says.

As a result, rents increased for the second consecutive quarter, with 27% more surveyors reporting a rise in rents than a fall. Just a year ago the picture was very different, as over supply pushed rents down and 29% more surveyors reported falling not rising rents.

Although interest rates are at a record low, making property a potentially attractive option for investors, difficulty in securing buy to let mortgages is contributing to the lack of supply. New supply of property to the market remains low and has now fallen for four consecutive quarters, although at a slightly slower pace.