News and Press releases

Rental demand soars as house buyers' dreams are shattered

05/08/2008

New statistics from the country’s leading lettings agency, which would warm the cold heart of TV’s most notorious landlord, reveal demand for residential rentals has reached record levels – and one of the biggest growth areas is for family homes rather than traditional student and single digs.

Around half of the demand is for unfurnished property, with many who want to move home deciding not to buy because of the shortage of funds available for mortgages. As a result, landlords are reaping the benefits from soaring rents.

The shift to rented accommodation is being fuelled by the most severe mortgage squeeze on record. The number of mortgage products available at present is only one-seventh of those being offered a year ago. Meanwhile, arrangement fees for the products available have soared on average by 20% in the last year and by 60% for some fixed-rate deals.

Last week’s Bank of England figures show home loans approvals in June at 36,000, down from 41,000 in May.

DJ Alexander said its July lettings figure had broken all monthly records in the company’s 26-year history, with 185 properties rented out in Edinburgh. Its Glasgow office had also exceeded previous records, with 62 lets for July as against a monthly average of 40.

David Alexander, head of DJ Alexander said: “For several months demand for stock has been approximately 40% above our normal monthly average. Had the properties been available, our lettings tally during July would have exceeded 200. This is a phenomenon across the country as every letting agency in Scotland is incredibly busy.”

He said demand was being driven by people not normally considered traditional rental customers, such as young executives, nurses, newly qualified teachers and students.

“One of the reasons for the upsurge in demand for unfurnished lettings is that increasing numbers of clients have been, or still are, home-owners with belongings of their own.

“About 50% of new rental demand now relates to unfurnished properties, whereas historically 90% of rental requests had been for furnished flats and houses. As a result, there is now little or no difference between what it costs to rent a furnished and unfurnished property.”

Alexander said some home-owners who had sold their previous homes had no choice but to rent. “We even have successful sellers moving to rented accommodation, happy to see the proceeds of the sale earning 6.5% interest. They are in no rush to move back to being owner-occupiers as they seem to think that prices will fall further before they start to rise again.”

The slump in the housing market in Scotland, with the number of sales down 40% this year, has led some builders of new flats to make properties built for sale available for rent. Both Clyde Property and DJ Alexander are in talks about taking hundreds of new, unsold flats onto their letting lists.

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