A few are, but many more are staying put - and their numbers are being swelled by a new set of tenants. Caron Williams is one such. Last week she finally gave up searching for a four-bedroom house in south London. The agents' cupboards were almost bare; the few houses they could offer were either overpriced or rundown. So Caron, 29, and her husband, Ian, 30, have decided to rent for a couple of years.
'When I was buying before, I used to see a house and think 'I must have it',' she said. 'But this time, as there is a more viable rental market, I don't have that sense of desperation. We used to live in Milan, where everyone rents apartments, and it seems to work there.'
Anyway, she thinks, it's more fun to rent: 'You can go and try out different areas you would not otherwise consider. We may look in Kensington, where Ian and I both lived when we were single. We couldn't afford to buy a house there, but we could afford to rent a flat.'
One of the reasons the Williamses are not nervous about renting is that they do not envisage house prices rising much in the next couple of years. 'There is always the worry that you could miss out, having sold at the bottom of the market,' Caron said, 'but we wouldn't be buying the house as an investment anyway. You have to buy somewhere to live in. We want to get the house we really want.'
What makes the Williamses' flexible approach unusual is that they have a family - one small son, Toby, and a second child due next month. Annabel Barnes is more typical of the new young renter.
She and her husband, Simon, failed to sell their one-bedroom flat in St John's Wood for pounds 110,000. 'We thought we'd like to live somewhere more central and have a bit of fun for a while,' said Annabel, 27. She works for Cluttons London Residential Agency, which helped her find a two-bedroom flat in Knightsbridge from where she and her husband can walk to work. They have rented out their own flat for pounds 800 a month, which covers all their costs.
Statistics published this month by the agency showed that a quarter of those renting are in the same position as Annabel: letting out their own home and renting another. By far the largest group are newly-weds or cohabitees, the people who have been hardest hit by the recession.
It seems that the fall in house prices has freed people from the pressure to buy in order to make money and allowed them more choice in where to live. This has been the experience in Manchester, where the Salford Quays development near the new Granada Studios has rented out well.
Martin Dearden, a partner in Robert Jordan Associates, which has five offices in south Manchester and Cheshire, says job mobility is the other key factor. 'The young professional who needs to be mobile does not want to buy only to find he or she is going to have to move,' he said. 'People are very nervous about taking on capital commitments even though house prices are at historically attractive levels.'
Renting a one-bedroom flat in an area such as Wilmslow costs about pounds 325 a month. To buy the same flat with a standard pounds 40,000 endowment mortgage would cost pounds 275.79 a month with the Halifax. Despite this temptation, few renters are being lured away from their tenancies. Mr Dearden knows when tenants are thinking of buying because he is contacted by the lender for a reference. He was getting about 10 inquiries a week earlier this year. 'We're down to a trickle of three or four a week now,' he said.
Of course, many of those staying put are doing so out of necessity, some because they could not afford to sell a home at a big capital loss. Judith Royal (not her real name) is typical of these. She and her husband borrowed pounds 74,000 to buy and do up a one-bedroom flat in Balham, south London, in 1988. As their family grew, to include two children, the value of their flat shrank. The most it would fetch today is pounds 60,000.
They are now renting out the flat for pounds 585 a month, which covers their basic mortgage, and are paying pounds 1,150 a month to rent a three- bedroom house in East Sheen. Mrs Royal feels bitter about their experience: 'I hate the very thought of that flat. I'd rather die than ever live there again. I am 40 so I had to have my children when I did. There are so many people who have been caught like this and who have had to postpone having children.'
The Royals expect to buy another house eventually, though they may have to wait many years before they recoup their losses.
The 1988 Housing Act made it far easier to rent out your home by bringing in Assured Shorthold Tenancies. These agreements were designed to rid home owners of the problem of tenants who would not leave. The Act coincided with the start of the recession, and together these factors helped to stabilise the level of private rentals - though at a mere 7 per cent of the market.
Now a new measure may knock that back. Under consumer protection law, all landlords - or their agents - are responsible for ensuring that the furniture in the home they rent out meets new fire regulations. This is designed to protect the rooming-house tenant, but it applies equally to the amateur landlord and the serious investor. Shirley Dent, of Knight Frank & Rutley's lettings department, thinks it could take away a lot of business.
There is already a shortage of property at the top of the rental market. Knight Frank & Rutley's Chelsea lettings office has just had its busiest September and October ever. Americans top their lettings league, with the British and other Europeans the next largest groups.
What this type of client wants is very good property, preferably purpose-built, in a very good location. Despite all the developments of the past 10 years, such property is still hard to come by in London.
Those landlords who have it are now getting returns of around 10 per cent on their investments. As a result, new investors are starting to sniff around. Robert Orr-Ewing at Knight Frank & Rutley in Chelsea had instructions last week from two developers looking to buy, do up and rent out apartments. They were the first for four or five years.
The company's Kensington office is letting part of the Kensington Gardens Square development in Bayswater, which has been sold almost entirely to investors from the Far East. This is where the new investment money is primarily coming from. Agents here are looking to Tuesday's Budget to encourage British investors to follow suit and save the rental market from declining even further.
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