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UK Rents Falling Quicker Than House Prices

July 8, 2009Article by Ray Withers

UK property investment suffered rents dropping across the residential lettings sector but rental expectations suggest the trend is set to moderate, says the Royal Institute of Chartered Surveyors Lettings Survey for June.The net balance of surveyors reporting falls rather than rises to the lowest level since reporting started in 1999.

The change has been most marked in Scotland where 80% more surveyors reported a fall than a rise in rents, down from 58 %.London property investment, continued to favour residential tenants. A net 85% of surveyors reported a fall than a rise in rents for houses in London down from 71%.

Surveyors are reporting that gross property yields are now falling for the first time since April 2007, indicating that rents are declining at a more rapid pace than house prices.Looking forward, the picture looks a little more encouraging for landlords.Rental expectations, though still negative, have improved markedly.

The net balance of surveyors anticipating future rental declines rather than increases rose to 25% from 41%.
An interesting development in the latest survey is the increased willingness of landlords to consider selling their property at the expiry of a tenant lease. This has edged back up to 1.8% having fallen to just 0.2% in the three months to January.

Tenant demand for rental property continued to increase, albeit at a slower pace. A net balance of 16% more surveyors reported a rise than a fall in new tenant lettings down from 42%.The net balances of surveyors reporting new instructions to let both flats and houses are still rising but the pace has started to slow. For flats and houses, 17% and 12% more surveyors reported a rise than a fall in new instructions to let flats and houses respectively, down from 44% and 49%.

RICS spokesperson Jeremy Leaf commented: “Property transactions are starting to rise from very low levels and the influx of supply in the rental market has slowed as vendors begin to find buyers.“Demand for rental property is still high but tenants have been able to take advantage of a flooded market to negotiate lower deals. Even so, the downward pressure on rents should ease in the coming months providing some good news for landlords.”

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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