'Desperate' builders turn to renting as house prices fall

Published on Tuesday 15 July 2008 21:22

'To let' signs replace 'for sale' boards as the housing market switches focus after the credit crunch

SCOTLAND'S faltering housing market is forcing estate agents and builders to move into letting properties instead of selling them.

Across the country, house builders and agents hit by the credit crunch squeeze on mortgages are shifting their focus to the rental sector, The Scotsman can reveal.

Evidence of the change emerged yesterday when Glasgow estate agency Clyde Properties revealed it had purged three directors and made a number of redundancies in its estate agency business.

Alan Burke, Martin Smith and Martin Turner resigned as directors of Clyde Properties to pursue "better opportunities outwith estate agency", Bill Cullens, chairman and founder of Clyde Property, disclosed.

Cullens told The Scotsman that sales of houses across Scotland were down 40 per cent and average house prices have collapsed as much as 15 per cent.

He said: "Along with other agencies there have been redundancies on the estate agency side. It would be foolhardy not to do these things."

As an alternative, Clyde has invested 1.2m in a new headquarters that also serves as a lettings centre.

"Last year we had 1,500 let and managed properties, today we are sitting on over 1,800," said Cullens, who estimated this figure will grow to 2,000 by the end of the year.

He added: "We are looking to expand our lettings business either through acquisition or organic growth.

"We see that really growing in the next couple of years."

Further evidence of the shift emerged yesterday when lettings agency D J Alexander reported it has received approaches from several smaller-scale residential developers desperate to rent out flats that had been intended for sale.

David Alexander, the chief executive of the agency, said letting out properties was a "lifeline" for some builders. According to Alexander, demand in the lettings market was driving up rents as much as 25 per cent on average.

Gordon Cunningham, head of residential property at Tods Murray, yesterday predicted that letting will be attractive to first-time buyers and short-term purchasers such as students and professionals on assignment.

Cunningham said: "More people are going to be forced to let, such as first-time buyers, and I suppose even the short-term purchase people who plan to be in Edinburgh for a few years.

"It is going to be better because the way prices are going, 'to buy not rent' has turned on its head. No-one will consider a short-term purchase."

He argued that house-builders could easily turn renters into buyers when mortgages become more available.

He said: "A good proportion of the people who initially rent homes from them will want to stay on as owner-occupiers once the mortgage situation eases."