Rents Are Rising - Good News For Landlords!

Property landlords in the UK are likely to see rental expectations increase as the supply of new properties coming onto the market falls for the second quarter in a row

RICS Logo The latest residential lettings survey from the Royal Institution of Chartered Surveyors shows that the rise as new instructions fall brings an end to the downward trend in rents that has been around since the autumn of 2008.

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% 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% of respondents believing rents will to rise over the coming quarter, up from 22%.

The more positive picture for rents can be attributed to the continued decline in supply of both flats and houses in the marketplace, the survey says. Some 23% more chartered surveyors reported a fall rather than a rise in the number of new landlord instructions for this period, up from 18% 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, the report points out.

Demand remains strong with 16% 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.

'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,' explained RICS spokesperson Jeremy Leaf.

'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,' he added.

Rod's View

This report from RICS makes interesting reading. In summary they are reporting that:

Many first time buyers are still forced to rent
There is a supply shortage of rental property
Rental prices are now increasing

None of this comes as a surprise to us. Since the supply of new stock is still very low and inadequate for demand, the shortage is likely to continue.

As a landlord, you face a double win here. If more people rent the shortage of stock will push up rental prices.

And if more people buy, you will see higher capital values as purchase demand increases.

Either way you win as a landlord.

Facing this situation, what should you do? I recommend investing now at the bottom of the market provided that you can get a strong rental yield. Either way you'll be well placed for the upturn.

Even if we bump along the bottom of the cycle for a while you'll be insulated from capital value fluctuations in the short term, provided that your rental income covers the outgoings.