Rent expectations on the rise as new instructions fall

The supply of new properties coming on to the rental market has fallen for the second consecutive quarter possibly bringing an end to the downward trend in rents that has been in place since the autumn of 2008, says the latest RICS Lettings Survey.

The net balance of chartered surveyors reporting rising rather than falling rents in the three months to January 2010 was zero. This follows five quarters of negative readings, and is in marked contrast to April last year when 58 percent more chartered surveyors were reporting falling rents, an all-time low for the survey.  In addition, expectations as to the outlook for rents continues to strengthen with a net balance of 33 percent of respondents believing rents will to rise over the coming quarter (up from 22 percent).

The more positive picture for rents can be attributed to the continued decline in supply of both flats and houses in the marketplace. Twenty-three percent more chartered surveyors reported a fall rather than a rise in the number of new landlord instructions for this period, up from 18 percent in the previous quarter. Although the weather may have been a factor in this, it is more likely that the upturn in the housing market has tempted many of the accidental landlords away from the lettings market.

Demand remains strong with 16 percent more respondents still seeing it rise than fall. Would be first-time buyers, unable to get a foot on the property ladder, are still a major source of increasing demand for good rental properties. Houses remain more popular than flats and it is the supply / demand imbalance in this market that is also helping to push rents higher.

RICS spokesperson Jeremy Leaf commented: "It is becoming clear that movements in the housing market are affecting lettings: the RICS housing survey has  seen a steady increase in the number of new instructions coming on to the market over the past few months, whilst simultaneously we see with this survey that the number of properties available to rent has decreased. This is a clear sign that the accidental landlords are returning to the sales market. If demand remains strong, which it is likely to as many first time buyers are still finding themselves priced out of the housing market, then rents should continue to rise as would be tenants compete for fewer properties."