Builders turn to rental market as sales fall

Published on Saturday 12 July 2008 14:24

HOUSEBUILDERS are turning to the rental sector in a bid to generate income from new properties they cannot sell.

Builders are approaching letting agents to try to circumvent the cash flow crisis caused by the severe slowdown in sales.

The unprecedented step comes as the housing market goes into free fall. Last week 4,000 jobs were cut by builders, including Barratt, Persimmon and Redrow.

Scottish housebuilder Mactaggart & Mickel (M&M) became the latest to shed jobs after letting 11 workers go from its building sites. It is now only selling about two houses a week, down from 12 last year.

The rental market is booming as sales plummet because potential housebuyers cannot get mortgages approved during the liquidity crisis.

DJ Alexander, a letting agency, said it has received approaches from several smaller-scale residential developers to market their flats. It is now approaching larger-volume housebuilders to see if they will consider renting out family homes lying empty on their new developments.

David Alexander, proprietor of DJ Alexander, said: "There is plenty of underlying demand to buy new properties, but insufficient mortgages to go round due to the volte face by the lending institutions. The rental market may be a lifeline for some builders because rates for new leases are probably at least 25% higher, on average, than they were this time last year."

Alexander said he was already marketing more than 50 properties for four builders in Edinburgh.