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Growing rental demand marches on

Growing rental demand marches on

Category: Mortgages

Updated: 03/03/2011
First Published: 03/03/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The continuing problems faced by would-be homeowners in securing a mortgage are sending the cost of renting skywards.

Rents rose at a rapid pace in the three months to January, with a falling supply of rental properties and strong tenant demand also contributing to driving prices upwards.

Continued difficulty in securing mortgage finance and large deposits required by lenders remain a barrier to home ownership.

As result, many have turned to the rental market and tenant demand has grown rapidly since late 2009.

In the latest Royal Institute of Chartered Surveyors' (RICS) survey, 32% more surveyors reported seeing a rise rather than fall in demand, with houses more in demand than flats.

In turn, 40% more chartered surveyors reported rents rose rather than fell in the three months to January - which is the highest positive reading in the survey's history.

There has also been a rise in the proportion of social tenants – perhaps unsurprisingly given the economic conditions.

Social tenants now make up 11% of the market, almost double that seen in 2009 (6%).

While demand for rental housing rises, supply falls, with 4% more surveyors reporting decreases, not increases, in the three months to January.

Separate research from the Association of Residential Letting Agents predicted that the rental sector will continue to grow in 2011, with rising demand outstripping supply for another year at least.

Looking ahead, surveyors remain positive that the market will remain buoyant, with 37% more predicting rents will rise rather than fall over the three months to April 2011. All areas of the UK expect rents to increase, with relatively modest rises in the South West but much more notable increases in London.

"The current buoyant state of the rental market is likely to persist for some time to come, given the challenges facing the sales market," said Jeremy Leaf, spokesperson for RICS.

"It is unlikely that finance for first-time buyers will become much more readily available, while uncertainty over the economy may also deter potential homebuyers.

"As a result, demand for property to rent will remain strong and in all probability will continue to outstrip supply. In this environment, rents will remain on an upward trajectory adding to the pressure on many households whose incomes are already being squeezed by rising inflation prices and the hike in VAT."

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