Demand for rented property continues to rise although at a slower pace according to the Royal Institute of Chartered Surveyors latest letting survey published this month. This is due to more stable conditions in the UK housing market. The survey for England, Wales and Scotland for the three months to the end of January 2005 indicates the weakest growth in tenant demand for rented property since October 2002. 13% more Chartered Surveyors report a rise in demand, down from 23% in the previous quarter. Demand for houses is outstripping that for flats by a wide margin, indicating a degree of continued uncertainty in the sales market for family homes.

Rents appear to be increasing for the third consecutive quarter although at a slower pace. Rent increases were spread across all regions with the largest rises recorded in London and the north of England. The RICS expects tenant demand for property and rents to continue rising in 2005, raising investors rental returns, however, these are still likely to lag behind the cost of mortgages. According to RICS spokesmen, Jeremy Leaf :

'It looks like any signs of panic in the housing market are largely over, brining stability to the lettings market. However, many people may still be wary of buying in the current climate – which bodes well for tenant renting. RICS figures suggest that the reduced capital growth is not causing impulse selling and that landlords are perhaps becoming more sophisticated as they place more value on the long term benefits.'

The Council of Mortgage Lenders also notes the buy-to-let sector slowing down but still continues to account for 6% of total outstanding residential mortgage lending. The CML's latest survey shows that new lending to buy-to-let investors was down 18% compared in the second half of 2004 on the first six months of the year. CML senior policy advisor Andrew Heywood said :

'As the housing market boom gradually subsides, it is no surprise that growth in buy-to-let lending is slowing down. Our survey suggests that buy-to-let investors are largely holding onto their existing portfolios, but simply making fewer acquisitions. This trend of slower, but continuing, market growth is what we expect to see throughout 2005. Recent CML research to gauge buy-to-let landlords intentions suggest that most expect to maintain or increase their holdings, and have a long term interest in the market. We are confident that the buy-to-let sector will continue to grow and to form an attractive part of many investors portfolios.'

Ewen Sparks : e.sparks@shepherd.co.uk

Source:

Council for Mortgage Lenders and RICS