Property Rental Prices Falling As Supply Increases

The RICS Lettings Surveyfor Q4 2008, published yesterday, found that rents dropped across the residential lettings sector as would-be-sellers continued to flood the rental market with unsellable properties.

Between the third and fourth quarters of 2008, the net balance of Chartered Surveyors reporting rises (rather than falls) in rents fell from -12 percent to - 48 percent, the lowest level in the survey’s history.The change has been most marked in London and the South.

Surveyors are, however, still reporting that gross yields are rising although the net balance is the lowest since the three months to January 2008. This implies that rental levels are not at present falling quite as fast as house prices.

The survey suggests that the more powerful influence on the market is the rise in supply, RICS spokesperson Jeremy Leaf commented:“The market place has become more and more competitive as reluctant landlords continue to look to let properties they are unable to sell. With property sales at historical lows, the rental market will continue to boom – provided unemployment levels do not increase significantly. The downward pressure on rents will increase in the coming months where supply matches demand but with house prices still falling, yields will continue to increase for many investors.”