Rental prices pushed down by over supply

Thursday, 26 February 2009 11:48 AM

Excess supply and falling rents is a 'pattern replicated over most of the UK' according to the FindaProperty rental index.

Average rents for February of this year were £830pcm, down £10 from January and £42pcm compared to February 2008.

FindaProperty said a surge in supply had pushed asking prices down by 1.2 per cent in February, and by 4.8 per cent over the year.

However, the rental index also discovered how increased tenant activity had reduced the average time a property was on the market by one day to 70 days over the month. But time on the market remains up 15 days year-on-year.

The north-west experienced the worst decline, with annual rental prices down by 14.3 per cent, to £592pcm from £645pcm. UK rental yield remained unchanged at 4.6 per cent for the fourth consecutive month.

Andrew Smith, head of research, said: "The credit crunch and the downturn in the sales market have led to a very significant increase in activity in the rentals market.

"This is most dramatically demonstrated by the amount of stock currently available - a trend in part being driven by frustrated vendors listing their properties on the rental market and in part by an increase in turnover as tenants become more willing to move to secure better properties or more affordable rents. As a consequence, supply levels have soared and this has hit rental values, which continue to decline."

In London, areas most heavily dependent on City workers as tenants such as City of London, Tower Hamlets and Kensington and Chelsea are experiencing significant rental price falls, in some cases up to 11.7 per cent, or £221pcm.

Overall the most dramatic trend in the UK rentals market was the significant increase in stock levels. In the past six months alone the number of rental properties adver­tised on FindaProperty.com has almost doubled.

Mr Smith added: "Tenants are the real winners in this situation - they have a huge stock of property to chose from, often high-quality owner-occupier stock - and are in a strong position to negotiate on rents and/or services.

"According to some of our member agents, tenants are becoming more demanding as the market swings in their favour and landlords are now less likely to receive the uplift in rents at renewal that they might previously have achieved. Some landlords are offering extras such as cable & satellite TV, weekly cleaners or even improving their property to make it more appealing."

Vincenzo Rampulla, public affairs officer at the National Landlords Association (NLA), added: "This difficult housing market is forcing more people to try and rent out the properties they cannot sell. The problems these reluctant landlords face may not surface now, but with 71 per cent of our members concerned that rent arrears will rise in 2009, reluctant landlords should stop thinking of renting their property as a short term stop gap, but as a long term plan.

"With more rental properties on the market, the challenge is for landlords to compete on quality and standards. Tenants are currently in a strong position but professional landlords are better placed to attract and keep new tenants."

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