Home rental market now dominated by ‘reluctant landlords’

LETTING agents in Scotland say "reluctant landlords" – people who have bought a new house but can't sell their old one – are now dominating the rental market as the property slump continues.
According to DJ Alexander, Scotland's largest letting agency, 60% of properties launched on the rental market for the first time last month belonged to homeowners who are weighed down by two mortgages and are desperate to cover some of their
Costs.

They are turning to the rental market as a last resort as they struggle to find buyers for their old property.

David Alexander, head of the firm, says this represents a significant shift in the market.

At the end of last year, reluctant landlords represented just a tiny fraction of the overall rental scene.

"Up to the end of last year this category of client accounted for no more than 5% of market share but now it's the buy-to-let investor who is in the minority when it comes to new business," Alexander said.

He said traditionally it was common practice for people to buy a new property before they had sold their existing one, but the tightening of mortgage lending and the fall in property prices has left many people trapped.

"With a move-in date – and with it the prospect of a second mortgage – looming, they feel they have no alternative but to try and let out the unsold house in order to cover, or at least partially cover, their increased costs," he said.

But he insisted the demand for such properties is strong. With fewer people able, or wanting, to buy in the current climate, the appetite for rented property in Scotland has rocketed. Alexander said the second quarter of this year saw the biggest demand for nearly three decades. "This is my 28th year in this business and I have never seen demand like it."

At the same time, estate agents are reporting that people who are trying to sell their properties are using increasingly extreme tactics to attract buyers. Housebuilders have been offering incentives such as paying stamp duty for several months, but according to Willie Hunter of Hunters solicitors, private sellers are beginning to follow suit.

One woman in Edinburgh is offering two weeks at her holiday home in France as a sweetener for anyone who wants to buy her property while Hunters is preparing to launch a home exchange scheme next week.

It is hoping to pair people who want to downsize with sellers further down the chain who are desperate to sell so they can buy a larger property.

Hunter said: "The Wimpeys, the Barratts have been offering these kinds of schemes for some time. All we are doing is extending this to the private buyer."

Hunters has sold 30 properties a month for the past three months. "Properties are selling but it is slow," Hunter added.

SCOTLAND ON SUNDAY, 28 September 2008