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% of surveyors reporting increases in past rental values, from +21% 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, says RICS.
Demand for rented accommodation remained relatively strong with 19% 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 8% 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.
Some 4% 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%.
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 the middle of 2009.
Looking ahead, chartered surveyors expect growth in rental values to continue to slow. Some 14% of respondents predicted rises rather than falls in prices, down from 24% in the previous quarter.
‘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,’ said Michael Newey, RICS spokesperson.
‘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,’ he added.
According to Robert Nichols, director of London lettings specialists Edmund Cude, the central London rental market is showing no signs of a slowdown unlike the rest of the UK.
‘In fact, from this time last year, tenant applicants are up 31% with viewings up 19%. Furthermore, the tenancy renewal rate has also slightly increased from 46 to 51% This has further restricted supply and pushed up rents, even if increases were more modest,’ he said.
