Rental demand outstrips supply

Demand for rented properties seriously outstripped supply and rent levels rose during the three months to the end of May according to the latest quarterly survey of ARLA Member Letting Agents. These results show the shortage of properties and the continuing need for investment in the private rented sector at all levels.

Rents rose for the fourth quarter running for each type of property, including detached, semi-detached and terraced houses and flats. As a result of increased demand, void periods have fallen to an average of 24 days.

Over two thirds of all agents in Prime Central London report rising rent levels. Half of the agents in the rest of the South East say the same and in the rest of the country the proportion of agents reporting rises rose from 33% to 35%.

Seven out of ten Prime Central London agents say there are more tenants than properties. This is the highest figure seen since the ARLA surveys started six years ago. In the South East, ten percent more agents report demand is outstripping supply and the proportion in the rest of the country with a lack of supply has also risen.

Commented Adrian Turner, Chief Executive of ARLA, "There is a shortage of all forms of housing in this country and these results show that the shortage of good quality property is also apparent in the rented sector."

The average capital asset values of rented houses rose during the past three months by 2.2% in Prime Central London, 0.3% in the Southeast and, by contrast, fell by 3.9% in the rest of the UK."

Average rented house values ranged from £885,000 in Prime Central London to £229,900 away from London and the South East.

Rented flats did less well, with the average asset value across the country down by 1.3% for the three month period. Asset values for flats ranged from £501,000 in Prime Central London to £210,000 in the South East and just £153,000 in the rest of the country. However, flats showed a slightly higher gross return.

Despite the rising rent levels, the average weighted returns are down marginally from 5% to 4.8% for houses and from 5.1% to 5% for flats. ARLA believes this to be a reflection of continually rising house prices during the quarter.

Tenants continue to stay in rental properties for an average of well over a year. They remain in the same property for the longest in Prime Central London at an average of 17.7 months. This compares to an average of 15.2 months for the South East and 14.2 months elsewhere. These figures have shown little change for the past two years.

Said Adrian Turner, " Even though it still needs more investment, the Private Rented Sector is continuing to provide choice in housing and a safety valve for the housing market, particularly now, at a time of mixed expectations for future strong rises in house prices."

The ARLA survey of member letting agents is the largest survey of its kind in the Private Rented Sector, with 463 letting agents responding to this quarter's survey. The survey is supported by the ARLA Group of Buy to Let mortgage lenders: Bank of Ireland, Cheltenham & Gloucester. GMAC RFC, Mortgage Express, NatWest and Paragon Mortgages.