RENTAL MARKET UPDATE
1 July 2010
In our last newsletter we made the point that rental prices had ended the year very much in line with the values achieved 12 months before. However, the rental price increases apparent in the last few months can leave us in no doubt that rental prices have turned the corner.

The key driver of this trend is a substantial decrease in the number of available properties. According to findaproperty's statistics department, rental stock levels are down a whopping 32.6% since their peak in May 2009.

This decrease in available properties comes at the time of year when tenant demand is the highest, so it is little wonder then that we have seen three straight months of rental price growth and an annualised growth figure of 6.4% according to the latest June figures The extent of the decrease in stock levels has taken some industry commentators by surprise. Whilst there is no doubt that some "reluctant landlords" have now decided to sell up, house prices are continuing to rise suggesting that the sales market has not been flooded with properties and perhaps that this is not quite the whole story. Our internal data certainly suggests that a much larger proportion of tenancies are renewing, which is no doubt another contributory factor accounting for the shortage of rental properties.

Either way, this is good news for existing landlords. With rental prices increasingly strongly and sales prices pushing up the capital value of rental properties in London up 6.2% over the past year, we are certainly back in the realm of double digit growth. Add to this that rental yields are currently at 4.7% and, against a challenging economic backdrop, it is hard to think of an asset class that is currently performing better.

Source: Findaproperty rental index Apr 2010, Findaproperty rental index Q2

Click here to read next article