Rental Property a good investment

The asset value of rental property in London and the South East has continued to rise in contrast to falls reported in parts of the rest of the country. Rents have also risen in the south, but fallen elsewhere.

However, the results of the latest ARLA quarterly survey of member letting agents published 14th June, shows that average asset values and rents throughout the country provide a healthy investment climate in the private rented sector.

This healthy picture is reported as industry-wide fears are growing that the temptation to over-regulate coupled to empire-building in town halls could still impair the growth of the private rented sector

Despite this, the second quarter survey found that, over the last three months, ARLA member letting agents have each signed an average of nine landlords who are new to the rental market. At the same time, they lost three landlords who have either died, retired or left the market for other reasons.

10% of ARLA offices have acquired more than 20 landlords who were new to the rental market and more than half of all offices have taken on in excess of six novice landlords. The fewest number of landlords coming new to the market were to be found in prime central London and the highest numbers were to be found outside London and the South East.

Rises in the capital values are reinforced by the balance of supply and demand which is reported as showing that there are more tenants than there are available properties in London and the South East with the rest of the country close to equilibrium.

Overall, more than a third (36%) of letting agents say there are currently more tenants than properties. This compares to 34% who believe there are more properties than tenants and 29% who believe supply and demand is in balance. Demand is highest in prime central London.

ARLA chief executive, Adrian Turner said: "Again, we can report that the private rented sector is not only alive and well but flourishing."

"There is no reason for this not to continue provided that industry-wide fears that burdensome regulation and empire-building town halls do not interfere in the healthy growth of housing choice. This is particularly relevant at a time of so much discussion about the provision of housing options."

Nearly a third of all ARLA letting agents report landlords are buying more property. This is sharply up from the first quarter of 2006 when only 17% of respondents reported that landlords were active in the market.

The capital values of both houses and flats in the rental market have been subject to quarterly fluctuations. However, the overall weighted average shows a rise in value for rented houses of 0.3% and 2.7% for flats during the last three months.

The vast majority of tenancies (85%) are Assured Shorthold Tenancies. However, in prime central London a third of all tenancies fall outside the Housing Act. Instead, contractual agreements are drawn up by the letting agent, often following detailed negotiations between the parties.

On average, tenants remain in a property 15.8 months, staying longest in prime central London (nearly 18 months) and for 14.6 months outside the South East.

Author: John Arnold

Published on 21/6/2006.

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