Property slump fuels growth in rented housing

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The Independent Online
THOUSANDS of householders, unable to sell but desperate to move, are fuelling the first growth in private rented housing since the First World War.

Residential lettings have been the one sector of the property market to expand in the past two years, with people reluctant to buy as prices fall, and vendors having no incentive to sell.

It is estimated that more than 100,000 new homes came on to the letting market last year. Lettings agents have reported a 20 per cent rise in managed properties, while the number of private homes on short-term lease to local authorities has risen by 30 per cent.

All the large building societies have seen an increase in the number of borrowers asking for permission to let their homes. Abbey National believes the growth in approved lettings has been more than 10 per cent.

Hard-pressed individuals are not the only ones renting out their homes. Property developers are releasing blocks of unsold flats to rent as an alternative to accepting low prices for sale.

Deregulation of rents in the 1988 Housing Act and the growth of shorthold tenancies has also encouraged more landlords to let more property.

But the rise in the number of good quality flats and houses has had an impact on rents. Average prices are falling in London and the South-east, the centre of the property recession, and are static elsewhere. Large numbers of owners are finding it difficult to get enough rent to cover their mortgage payments.

The average mortgage taken out in the boom years was more than pounds 60,000, so homeowners looking to rent need at least pounds 150 a week. Such rental levels are rare for smaller properties outside London and initial purchase prices in the capital were higher.

Although the recession has increased the attractiveness of renting it has also meant a decline in job mobility, one of the generators of demand for rented housing. Private rented accommodation accounts for only about 7 per cent of total households, compared with more than 90 per cent before 1914 and about 25 per cent today in France.

Most letting agents predict that the numbers will continue to increase in line with the rising supply of properties.

Piers Parbury, director of Doorknob, residential agents in Covent Garden, central London, said supply was outstripping demand. 'Two or three years ago if we advertised in the Evening Standard people would be knocking our door down. Now we would get two or three telephone calls.'

The surplus has led many small landlords and individuals to turn to local authorities to take on their homes.

Private sector leasing, as it called, has nearly doubled in the past 18 months to more than 20,500 units in London alone, according to the Bed and Breakfast Information Exchange.

The London Borough of Hackney has taken on 3,800 private properties on leases of up to three years which are used to house homeless families. Even at rentals of up to pounds 200 a week, the charges are less than for inferior accommodation in a bed and breakfast hotel at pounds 40.60 a night.

Estate agents report that a new generation is wary of buying property after seeing friends and colleagues get their fingers burnt in the boom of the 1980s. Edward Tyler, chairman of the Property Bureau chain of letting agents, believes the smart new figures are those that rent. 'We have had people who have sold their homes a few years ago and have gone into the rented sector. They must be laughing.'

----------------------------------------------------------------- REGIONAL RENT LEVELS ----------------------------------------------------------------- Furnished property pounds per week Two-bed flat Three-bed house Region Scotland/N England 71 87 Midlands/E Anglia 92 107 SW England 93 119 SE England 111 162 Greater London 175 243 Inner London 214 308 Prime Central London 314 492 NATIONAL AVERAGE 152 217 ----------------------------------------------------------------- Source: Association of Residential Letting Agents. -----------------------------------------------------------------