Rents fall as unsold homes hit market
Rents have fallen for the first time since April 2003 as a result of the rising number of homeowners forced to rent their properties because they can’t sell.
The number of properties up for rent jumped significantly between August and October, according to the Royal Institution of Chartered Surveyors (RICS), largely as a result of would-be sellers putting their homes up to rent instead.
As a result of the glut of property hitting the rental market, rents have fallen for the first time since April 2003, and supply now outstrips demand, says RICS.
While cheaper rents might be welcomed by people unable to get a foot on the property ladder, it is less positive news for landlords.
Seema Shah, a property economist at Capital Economics, says that with no end in sight to the dismal property market, pressure on rents is likely to get worse.
“The continued strength of tenant demand is not surprising given that lending criteria remain tight and house prices are widely expected to fall further,” Shah says. “The latest RICS lettings survey added further weight to our expectations that the weakening economy and rise in the supply of rented accommodation, as homes become increasingly difficult to sell, will result in slower rental growth.”
And the National Landlords Association (NLA), the largest national body for private landlords, warns that renting out a property is not for the faint-hearted.
Although the majority of this new breed of landlord may not have any long-term commitment to the rent their homes, given the current economic outlook they may not have much choice.
It says landlords must, therefore, be prepared as there are a number of serious issues that need to be addressed if they don’t want to risk being left in financial difficulty.
Simon Gordon, head of communications at the NLA, says: “Becoming a landlord in this market is not for the faint-hearted. New landlords, especially those who hadn’t planned on starting a lettings business, must make themselves aware of the rules and regulations so they can operate their tenancies successfully.”
These include getting permission from their mortgage lender and/or freeholder to rent out the property and ensuring their home insurance is amended to acknowledge the fact it is being let out.
In addition, new landlords must consider whether they need a written tenancy agreement, whether their home complies with any gas and fire safety requirements and how they plan to protect their tenants’ deposits.