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| FRIDAY 25TH MARCH 2005 |
 SHORTGAGE
OF UK RENTAL PROPERTY INCREASING
An increasing shortage of properties in the rental market is
reported in the latest quarterly survey of the Association
of Residential Letting Agents (ARLA) letting agents published
this week. As a result, although average rental returns have
declined slightly, achievable rent levels have increased over
the last six months.
A third of all ARLA member offices reported having more
tenants than properties available for them in the three months
to March. This is up by nearly a quarter (23%) since the
last quarter of last year and it shows the highest level
of demand for rental property reported for nearly three years.
Throughout the country, less than four out of ten agents
believe there is an oversupply of rental property, although
nearly a third (30%) believe demand and supply is in balance.
However, there is still a substantial oversupply of properties
in prime central London, where half of all ARLA members report
more properties than tenants. This is a significant reduction
since the previous quarter. Then, nearly two thirds were
reporting an oversupply of prime central London property
to let. On the plus side, London has seen improvements in
rental returns.
Throughout the country, the differences in the reported
rental returns were small. The average weighted rental return
for houses was down slightly from 5.0% to 4.9% and for flats
it was down from 5.3% to 5.2%. Within this fairly static
picture, the improvement in prime central London is significant.
The average return has improved from 4.6% to 4.8% in the
three months to March.
The capital asset values of rented properties have remained
stable with values rising by 1.5% in the rest of the South
East and 2.7% in the rest of the UK. In prime central London,
values fell by 2.7%.
Average rents achieved ranged from £2,604 a month
for a house and £1,663 for a flat in prime central
London to £828 a month for a house and £583 for
a flat outside London and the South East. In prime central
London, the average rent of a house is more than half as
much again (57%) as the average rent for a flat. This substantial
difference is to be found elsewhere. The average rent for
a house in the rest of the South East is 48% more than a
flat and in the rest of the country houses fetch rents that
are 42% more.
In all areas, agents report that achievable rent levels
have risen. Compared to three months ago, there has been
a substantial improvement in prime central London, where
the proportion of respondents saying there has been an increase
in achievable rent levels has risen from 24% to 28%. This
applies to all property types. In the rest of the South East
the average achievable rent has risen from 21% to 26% and
in the rest of the country there has been a small decline,
from 37% to 35%.
Average void periods remain at around a month a year all
over the country. The longest empty periods are to found
in prime central London, where the period between lettings
averages 32 days. In the rest of the southeast the average
is 27 days and away from London and the South East the average
void period drops still further to 25 days.
With some 500 letting agents and well over 300 investment
landlords responding to the ARLA quarterly surveys of the
private rented sector and the buy to let market, this far
exceeds any other survey base within the rental industry.
These highly significant quarterly results are achieved with
the support of the ARLA panel of Lenders, Birmingham Midshires,
GMAC Residential Funding, NatWest Mortgage Services, Paragon
Mortgages and The Mortgage Business.
ARLA Chief Executive, Adrian Turner said, "Everyone
with an interest in the lettings industry owes a debt of
gratitude to the letting agents and investment landlords
for their invaluable help in supplying the Association with
information we all need to make informed decisions."
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