Buy-to-let: rental demand 'still growing'

Posted on 19 December 2007 by Charcol

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Demand for rented flats has slowed, but family homes remain in high demand, new figures suggest.

The latest Residential Lettings Survey from the Royal Institution of Chartered Surveyors (RICS) shows continued growth in the rental sector, apparently bolstered by reluctance to enter the residential mortgage market among would-be first-time buyers.

The proportion of surveyors reporting a rise in rental demand in the three months to October was 20 percentage points higher than the proportion reporting a fall. This was down from a gap of 28.5 percentage points in the previous quarter, a period in which RICS said demand had "risen very sharply".

However, the figures also suggest that higher interest rates may have pushed more landlords out of the market. Some 6.5% of landlords sold their property at the expiry of their tenant leases, up from 6.1% in the previous quarter. The proportion is the highest since the beginning of 2005, although the institution points out that it remains much lower than the 10% recorded in that period.

RICS spokesperson Jeremy Leaf said: "With rents still on the increase, many would-be-buyers will find accessing the housing market even more difficult as they struggle to raise the capital for that first important purchase."

"However, many landlords will still take solace from uncertainty in the economy and enjoy the gains from rising rents."

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