Rental prices increased at a slower rate towards in the early part of the year as some tenants began to resist the sharp rises in rent levels seen in recent quarters, according to the latest RICS Residential Lettings Survey.
Rental prices continued to increase across the UK, albeit at the slowest pace in two years, in the three months to January with a net balance of +13 per cent of surveyors reporting increases in past rental values (from +21 per cent in the previous quarter). With values having risen strongly for some time, it seems that the market may be beginning to level out with prospective tenants less willing to pay increasing rents.
Demand for rented accommodation remained relatively strong with 19 per cent more respondents reporting rises rather than falls in interest from prospective tenants. Demand has seen strong growth in recent quarters; however, with an increasing number of first time buyers looking to beat the expiry of the stamp duty holiday in March, it seems some are now turning to the sales market, slowing the pace of rental growth.
In tandem with this, supply to market remained in positive territory in the three months to January with eight per cent more respondents reporting rises rather than falls in new instructions. Supply has now remained in positive territory for four consecutive quarters.
Significantly, with rental growth beginning to slow in many areas of the country and a recent upturn seen in prospective buyers of property, an increased number of landlords are looking to sell at the end of a tenancy agreement. Four per cent of landlords chose to place their property on the sales market in the three months to January, a significant increase from the previous quarter’s reading of 2.6 per cent.
From a regional perspective, surveyors in the North of England reported the lowest rental reading in the country, for the quarter while in London the increase in rents was the most modest since mid-2009.
Looking ahead, chartered surveyors expect growth in rental values to continue to slow. 14 per cent of respondents predicted rises rather than falls in prices, down from +24 per cent in the previous quarter.
Michael Newey, RICS spokesperson, commented: “With many potential first time buyers having been forced into rented accommodation due to problems with obtaining affordable mortgage finance, rental prices have grown quickly across much of the country in recent times. However, it seems that tenants may be becoming less willing to meet increasing rental values.
“While still growing, demand from potential tenants is also beginning to slow. With a recent upturn in buyers entering the sales market prior to the expiry of the stamp duty holiday in March, it seems that those who are in a position to get a foot on the property ladder may have chosen now to do so.”
