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Rental demand to outstrip supply until 2012

Rental demand to outstrip supply until 2012

Category: Mortgages

Updated: 02/03/2011
First Published: 02/03/2011

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 It is now over 6 months old so the content may be out of date.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 rental sector will continue to grow in 2011, with rising demand outstripping supply for another year at least.

This is according to the latest Association of Residential Letting Agents' (ARLA) member survey which shows almost one in four ARLA member offices believe more private landlords will enter the market in 2011.

The majority (59%) believing demand for rental property will continue to outstrip supply in 2011.

The squeeze on mortgage lending, high deposit requirements and anticipation of a Bank of England base rate increase and its effects on mortgage interest rates are believed to have had a significant impact on deterring would-be buyers from entering the housing market.

This has led to significant demand for rental properties, with average rental prices rising by 3.8% between December 2009 and December 2010, despite the average rent falling by 1.6% to £684 in the last month of 2010.

"The lack of new rental stock for the private rented sector (PRS) was the dominant factor in the market last year, and will continue well into 2012," commented Ian Potter, operations director of ARLA.

"The Leader of the Labour Party, Ed Miliband, recently flagged research that shows 41% young low-to-middle earners live in privately rented accommodation compared with 14% in 1988.

"This trend looks set to continue while mortgages are so hard to come by and the capital barriers to home ownership appear so entrenched."

According to ARLA, rising demand is affecting the whole of the UK, but is particularly pronounced in the south east and London.

There is hope for would-be first time buyers, however, with research revealing that the number of mortgages available to borrowers with smaller deposits has started to rise.

The total number of mortgage deals available at 90% loan-to-value (LTV), which require a 10% deposit, currently stands at 214, up from 144 in February last year. Meanwhile, 560 deals are now available to those with at least a 15% deposit (85% LTV), compared with 310 a year ago.

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