RLA : RPI : 'Flood of properties' hits rental values

News from the Residential Property Investor, the bi-monthly magazine for RLA members

other artilces from the June / July 2002 issue

'Flood of properties' hits rental values - June / July 2002

A combination of falling rents and rising property values have pushed down rental yields for the sixth quarter in succession, said the Royal Institute of Chartered Surveyors last month.

Its latest survey of the market reported a first quarter fall in rents, the first since January 2000 and a continuation of a trend that started when rents hit a peak in October 2000. Influenced by 'properties flooding onto the lettings market' expectations for rent levels 'remain comparatively weak', said the RICS. 'Surveyors reported no let up in the sharp rise in instructions, building further on increases over the past 12 months'.

When it came to rental yields, 60 per cent of surveyors questioned reported a fall in the first quarter of 2002. 'Yields look set to fall further in the near term. Residential property prices are expected to continue rising while surveyors expect only modest rent rises'.

However, the results are not uniform across the country. In the north surveyors expect rents 'to maintain a steady increase', in the east they expect them to remain static, and in the south west to show 'modest growth'.

Manchester surveyor John Saxon who contributed to the survey said: 'Rental demand remains strong but rents have not risen significantly as more property is coming onto the market'.

Liverpool based Miles Pickering of Venmore Thomas Jones reported: 'There is an over supply of all types of residential homes in Merseyside.

In London rents fell sharply in the first quarter but are expected to show a small rise over the coming months. But in the south east in general rents have been falling and are expected to continue on a downward trend.

The figures come against the background of mixed messages about house price movements.

'Although the likelihood of a collapse, as happened a decade ago, seems low, the longer that prices rise sharply like this, the greater the risk of a sharp correction', according to Phillip Shaw, chief economist at Investic Bank.

Alex Bannister, Nationwide's group economist who believes there are few if any signs that the boom is set to run out of steam, said 'record employment levels and low interest rates continue to underpin consumer confidence and this is translating into stronger activity levels'.

A rise in the number of completed house purchases along with a surge in mortgage applications year on year lead the bank to conclude that the market would 'remain buoyant'.

other artilces from the June / July 2002 issue