13 Jun 2012
June 13, 2012

Rents to keep rising says RICS

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Rents in buy-to-let investments rose further in the three months to April, with 13% more chartered surveyors reporting rises rather than falls in the three months to April.

The latest survey from the Royal Institution of Chartered Surveyors shows the growth was largely driven by increasing demand for privately rented properties.

For prospective buy-to-let landlords, rental demand is greater for houses than for flats.

Looking ahead, surveyors remain positive that the market will remain buoyant over the next three months, with 13% more predicting rents will rise rather than fall.

Across the UK, all areas expect rents to continue to increase with the exception of Scotland where expectations entered negative territory for the first time since October 2009.

Rental values in the UK have now grown consistently since 2009 as the problem of unaffordable mortgage finance and large deposits required by lenders remain a barrier to home ownership, with many potential buyers forced to turn to the rental market.

Significantly, the supply of buy-to-let property to the market continues to grow, albeit at a slower pace, with 7% more surveyors reporting increases rather than decreases in landlords looking to let their properties.

Unsurprisingly, with rental values steadily increasing, landlords’ gross yields on their buy-to-let investments also continued to grow during the early part of the year, although the pace of growth has begun to slow. This was the case in every part of the UK with the exception of London where tenant demand also saw a slight downturn.

Peter Bolton King, global residential director at RICS, says: “The rental market is still fairly buoyant and this looks likely to continue, given the challenges facing the sales market. Indeed, mortgage finance may become even harder to access particularly for first-time buyers if the euro crisis continues to deepen.

“This points to tenant demand continuing to outpace supply. As a result, rents will remain on an upward trajectory, adding to the pressure on many households whose incomes are already being squeezed.”