Reflecting the typical housing cycle and the apparently stagnant sales market, a record number of tenants are looking for properties to rent. Both rental returns and actual rents achieved are rising.
These findings, reported in the second quarter ARLA survey of member letting agents published today, are seen as a clear demonstration of the ability of the rental market to enable a soft landing for the house sales market.
More than a third, 37%, of all ARLA member offices report more tenants than properties available. This is a new record since the question of balance in supply and demand was first asked in ARLA's quarterly surveys three years ago. It overtakes the record of 33% of member agents reporting more tenants than properties in the last quarter's survey.
Average capital asset values of rented houses have remained stable. Values in some areas, notably prime central London, are down slightly, by 0.2%, and in the rest of the South East by 0.5%. In the rest of the country, average asset values rose by 2.3%.
However, there was a greater increase in the value of rental flats, which rose by 6.5% throughout the country, except for prime central London where they rose by just 0.2%.
The second quarter ARLA Survey, supported by the ARLA panel of Mortgage Lenders, Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages and The Mortgage Business, was completed by 489 member letting agents.
This most recent quarter shows that the average rent for a prime central London house is £31,800 a year and the average rent for a flat in the same area is £20,000 a year. Average rents for a houses and flats in prime central London are over three times more than the average rents in the Midlands and North and nearly four times the figure for Scotland and Wales.
Despite the high rents achieved, the rental returns in central London are lower than elsewhere at an average of 4.9%. However, during the second quarter, average returns rose overall.
Well over a third of all ARLA member letting agents report more tenants than properties, while the same proportion reported more properties than tenants. With a further quarter reporting a balance between supply and demand, the indications are that, overall, the private rental market is generally in balance. Only prime central London shows a marked over supply of rental property.
Void periods have fallen, especially in prime central London, where, on average, rental property is now empty for 29 days against 32 days during the previous quarter. In the rest of the South East, the average void has fallen from 27 to 26 days, while rising elsewhere in the country from 25 to 26 days.
Tenancies are signed up for an average of nine months but, in reality, tenants stay on much longer The longest initial terms of just over ten months and actual stays of nearly sixteen months occur in prime central London. In the rest of the South East, initial terms are 9.2 months, extended to an average of 15.4 months, and in the rest of the country initial terms of eight months are extended to an average of nearly fourteen months.
The survey showed that during the last quarter, investor landlords are seen to be marking time with their investment decisions, with a few inclined to disinvest. Commenting on the second quarter's findings, Adrian Turner, Chief Executive of ARLA said, "We are seeing most clearly a stable rental market reacting in the traditional way to the softening of house prices, with an increased demand for rental property. This shows that the private rented sector is both a mature and stable market in itself and that it enables house price stability.
"There is no doubt that the professionalism of the rental market and the Buy to Let investor have been contributing factors to the soft landing currently being experienced in the sales market."
Adrian Turner added,"We must hope that the many new pieces of legislation currently going through will do nothing to harm the ability of the private rented sector to continue to make a significant contribution to choice and flexibilility for the housing market,"
ARLA Members Survey of the Buy to Let sector
