Demand for rental properties continued to grow and landlords saw their yields increase, says the latest Lettings Survey from the Royal Institution of Chartered Surveyors (RICS). However, access to the buy-to-let market became harder for would-be-landlords as mortgage products became scarce.
Significantly, there have been fewer lettings, with 16% more Chartered Surveyors reporting a rise than a fall in tenant lettings, down from 20% in the last quarter. New landlord instructions (an indicator of supply) declined for the first time in the survey's history (1998), with 1% more Chartered Surveyors reporting a fall than a rise in landlord instructions compared to 11% in the previous quarter.
Demand for family homes still remains stronger than for flats, due to an oversupply of new build. 23% more Chartered Surveyors reported a rise than a fall in demand for houses compared to 12% Chartered Surveyors who reported a rise in demand for flats, down from 15% last quarter.
The credit crunch has restricted the number of buy-to-let mortgages approved, as well as the number of mortgages available to investors. However, established investors are reaping the benefits. Gross yields increased at their fastest pace since Q3 2005. Rising yields may have stopped the recent retreat of landlords from the market. The percentage of landlords selling their properties when tenant leases expire fell from 6.5% to 4.6%.
Rental expectations also picked up sharply and are more than double the survey's long run average. Key areas enjoying rental growth also picked up sharply in the North, South East and Midlands while London and the South West experienced moderate rises.
RICS spokesperson Barry Hall commented: "While banks remain cautious about offering loans, demand for rental property will continue to increase with many would-be-buyers unable to make the jump to home ownership. Established investors continue to reap the benefits of the current uncertainty in the housing market and have been enjoying the fruits of rising rents, but new investors are struggling to get the necessary finance to enjoy this buoyant sector. However, some landlords at the margins may desert the market after the drop in capital gains tax occurs in April."
