Students give a boost to the rental market

The number of properties available to rent dropped by a massive 6.2% this month, as a busy early autumn confirmed the recovery of the rentals market, according to the FindaProperty.com September Rental Index.

This was the biggest fall in supply since the beginning of 2008, as large numbers of tenants signed leases for homes. Demand was particularly strong at the lower end of the market, with buoyant activity among new students starting university courses in record numbers this year and young workers with tight budgets in the current uncertain economic environment.

As a result, flats saw an above average decline of 7%, while houses saw a reduction in stocks of just 4.7%.

The increased level of activity translated into a sharp reduction in the time taken to rent, which fell by a week between August and September - from 66 days to 59 days (time on FindaProperty.com site).

Rents on the other hand remained stable at £829 pcm, notwithstanding the increased activity and lower supplies which could, in other circumstances, give rise to upward pressure on rents. This is because there is relatively little price elasticity at the lower end of the rental market with students and first jobbers for example under budgetary constraints. In addition, there had been a surfeit of (particularly) flats available to rent.

Michael O’Flynn, Director of FindaProperty.com, comments: “Over recent months, the market has been characterised by an oversupply of properties, but this month we’ve seen a definite correction. Fresh demand from new tenants taking out leases on rented homes has cleared out some of the surplus stock, while the continued revival of home buying activity has shifted some property away from rentals and into sales, so there are fewer rental properties coming onto the market.

“Buy-to-let finance is scarce, so the current market will tend to favour the serious investor who is more likely to be a cash buyer or who has sufficiently low gearing to borrow against his or her portfolio. Indeed, they may be able to find some bargains, although the current investment market is not without its risks and arguably not for the faint-hearted. All this points to more restricted supply but no significant let-up in demand, so we could see rising rents and yields in the future.”