Boom time for lettings

"I love you,
You pay my rent."

- Pet Shop Boys, 1987

In these chastened times for the housing market, there are two sectors that have boomed before and after the downturn. The first is farms & estates and the second is lettings, or, what some of you may call, the rental market.

Previously once thought to be confined to students and divorced Dads kicked out of home, we are now seeing the emergence of Generation Rent.

The rise in both demand and supply in the rental market has been incurring since 2007 and renting was an increasing preference even before the sales market downturn, as many people were being simply priced out of the buying market and forced to rent. Since 2008, and the lack of confidence to sell, tied-in with a lack of job security and lack of choice of new build for those wishing to buy, many
Even the well-off have taken to renting. With the relative slowness of the sales market, many are choosing to rent for a period after they sell, have a good look around and try to acquire a new property at a bargain price.

In fact, our lettings offices (covering Glasgow, Edinburgh, East Lothian and the Borders) report that rental demand is continuing to grow, suggesting that more people are seeing rent as their only viable option and many potential buyers are taking a longer term view on re-entering the market.

Average rents are just under £600 per month in Glasgow and have been edging up over the last four years. However, at the moment, the new supply coming on to the market, including from 'reluctant landlords', who have not been able to sell their property, has helped to keep a lid on any exponential rent increases. The general upwards drift in rents has been observable across all sizes of property, but is particularly noticeable for larger property in well located markets, given strong sources of demand and limited supply.

The strength of the lettings sector is shown by the fact that one in five landlords across the UK bought more property in 2011. With an average annual yield of around 5%, flattening house prices and low interest rates, you don't need to have a Nobel Prize in Economics to work why.

It is arguable there are a number of factors that will encourage people across the market to continue renting for the foreseeable future. At the top end, executive relocations will feel safer renting for the duration of their contract rather than speculating in the market. The squeezed middle may still find it difficult to raise the deposit for their mortgage and feel more comfortable renting until salaries start to rise and jobs become more secure. And the poor, battered first time buyers will again need to see a significant change in confidence in job security before even contemplating the commitments of a mortgage (and meanwhile interest rates can only rise...).

Jaimie Millan, in our Glasgow Bath Street office (0141 248 4160) said, "In broad terms the rental market performing well. The shortage is in the supply of superior rental properties and adaptive, objective landlords. The rental v sale trade-off is changing for many 20 or 30 somethings, but the rental market doesn't quite cater to this new demographic, yet. Any property owners reluctant to test the sales market should consider the rental market and take advantage of this new breed of professional, long term tenants who seem to embrace the European concept of renting whether it's through choice or necessity."

So if you do find someone to pay your rent, make sure you love them. You may need them for some time.