Feature Article: (Published August 2010)

The Rise And Rise Of The UK Lettings Market

By Rory James MacLaren-Jackson

With uncertainty as to the slow recovery of the housing market for property sales, the story for lettings could not be more different. In contrast, the property rental market is seeing an incredible “bull run” that, more interestingly, has the strong foundations to see it potentially continue in the long term. 

A trend we have seen both in the lettings department of the agency we established and across the UK through the property agents we train via Letting4Success and Property Agency Training is the unprecedented demand for rental properties, particularly amongst young professionals.

Key indicators from agents on the ‘frontline’ are the sheer number of viewings being booked for a single property once advertised and then the fact that hot properties like modern apartments are routinely let within hours rather than days. With first time buyers also struggling to raise larger deposits and secure mortgages for property purchases, this strong demand is just one of the factors which has kept investor landlords holding their portfolios rather than selling. Low interest rates have also reduced mortgage costs on buy-to-let investments creating attractive yields for many landlords.

However, it is the demand from young professionals, who see renting as often the only option for their housing needs, that is most noticeably fuelling rising rents and sustaining investment in the rental market. Estimates from The Council of Mortgage Lenders suggest that a first time buyer now needs a deposit of approx. £34,000 – a serious increase from the £12,700 deposit required just three years ago. Even those with deposits are cautious of the economic outlook and how it may impact on the housing market. So whether it is “I can’t afford it” or “I’ll wait and see”, the result is a clamour for rental property that landlords are eager to supply.

But what will the future bring for the lettings market?

If interest rates rise, yields will drop and this may lead some landlords to sell, but this kind of natural correction would be expected after any dramatic and prolonged market boom. Likewise, fears that increasing legislation would deter landlords have been unfounded, as the letting agency industry has responded with service packages to make the process of lettings as simple as possible for new and experienced landlords.

Provided that higher taxes or a significant rise in unemployment do not make major economic ripples, the long-term outlook for the lettings market looks overwhelmingly positive.

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