The latest residential lettings market survey from the Royal Institution of Chartered Surveyors shows that rental price increases are slowing. And RICS is also warning landlords of the pitfalls of buying older property to rent out.
But, although growth has moderated, says RICS the expectations are for more increases. 13% more surveyors saw rent rises rather than falls in the three months to January 2012 compared to 21% in the previous three months and 14% more of them are predicting rises rather than falls in the future compared to the previous quarter’s 24%.
Rent increases are being driven by the strong demand for rental properties with 19% more surveyors seeing more demand rather than less.
But this is offset by the increased supply of rental properties with 8% more respondents to the survey reporting more properties on the market rather than fewer.
RICS also says that a recent rush to beat the stamp duty holiday by first time buyers may have dampened demand. Without this demand may have been even stronger.
Michael Newey, RICS spokesperson, said “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.”
One point to bear in mind is that tenants are in the same position as buyers when it comes down to disposable income and the threats to it in the current economic climate. So maybe they are just being more cautious.
With a current shortage of houses on the market RICS says that land-lords are now being forced to buy older properties, many of which need work.
As a result it says “According to the Building Cost Information Service (BCIS), private landlords could end up paying tens of thousands to resolve faults. For a four-bedroom house, a significant damp problem could cost anything up to Â£28,000 to repair and prevent from happening again, while subsidence could cost around Â£24,000 to correct.”
RICS is therefore recommending that all agents tell their clients to get a suitable survey before finding out the expensive way.
David Dalby, RICS Director of Residential said “Landlords could be without a tenant for several months while repairs are being carried out and it could be even longer if subsidence is discovered.
Estate Agents act for the seller and, even if they are NAEA or RICS members, they will not be able to advise purchasers on possible defects, and most of the time will be unaware of any issues with the property anyway. We are warning private landlords to know what they are buying and are advising agents to recommend surveys to all their clients.”