Number of properties to let on the rise

Owners experiencing difficulty selling their properties have turned to the rental market to take advantage of rising yields, according to the Royal Institution of Chartered Surveyors (RICS).

The net balance of chartered surveyors reporting a rise in new landlord instructions (an indicator of supply) increased to 29% compared to -2% in the previous quarter.

A significant drop in demand in the housing market has pushed sellers back into the rental market. RICS claimed many are taking advantage of rising rental yields while waiting for the effect of the credit crunch to abate.

The net balance of surveyors reporting a rise in gross yields is at the highest level in the survey’s history and buy-to-let landlords are reaping the benefits of a collapse in demand in the housing market.

Almost a quarter more chartered surveyors reported a rise in gross yields up from 5%. Around 28% more chartered surveyors reported a rise than a fall in tenant lettings, up from 17% in the last quarter.

Significantly, demand for both family homes and flats increased as many would-be buyers found themselves unable to step onto the property ladder, according to RICS. As a result, it said rising yields may have stopped the recent retreat of landlords from the market. The percentage of landlords selling their properties when tenant leases expire fell from 4.6% to 4.2%.

Surveyors reported that rents are still rising and rental expectations remain at more than double the survey’s long-run average. Key areas enjoying rental growth are the South East and South West, while London is the weakest area for rental growth.

RICS spokesperson James Scott-Lee said: “The sales market’s loss is the lettings market’s gain. Some would-be sellers are retreating from selling and letting or re-letting their properties as they wait for mortgage lenders to offer buyers more favourable lending criteria. While transaction numbers in the sales market are weak, many are taking advantage of rising rents and yields in the private lettings sector.

“With rental expectations high, landlords will continue to enjoy this increasingly lucrative market. Fears that a change in Capital Gains Tax would bring a new wave of sellers have, to date, not been realised.”