Rental demand soars as house buyers' dreams are shattered
RIGSBY would be rubbing his hands with glee. The credit crunch is persuading more and more Scots to give up the dream of buying their own home and opting to rent instead.
New statistics from the country's leading lettings agency, which would warm the cold heart of TV's most notorious landlord, reveal demand for residential rentals has reached record levels – and one of the biggest growth areas is for family homes rather than traditional student and single digs.
Around half of the demand is for unfurnished property, with many who want to move home deciding not to buy because of the shortage of funds available for mortgages. As a result, landlords are reaping the benefits from soaring rents.
The shift to rented accommodation is being fuelled by the most severe mortgage squeeze on record. The number of mortgage products available at present is only one-seventh of those being offered a year ago. Meanwhile, arrangement fees for the products available have soared on average by 20% in the last year and by 60% for some fixed-rate deals.
Last week's Bank of England figures show home loans approvals in June at 36,000, down from 41,000 in May.
DJ Alexander said its July lettings figure had broken all monthly records in the company's 26-year history, with 185 properties rented out in Edinburgh. Its Glasgow office had also exceeded previous records, with 62 lets for July as against a monthly average of 40.
Edinburgh-based Braemore Property Management's rental demand was up 15% on the same period last year, while the length of time properties were on the market had been slashed.
Independent property consultant Michael Holmes said: "Until now renting has been a dirty word, with people seeing it as money down the drain. Now mortgage rationing will push us into a more continental approach, in which the majority rents."
David Alexander, head of DJ Alexander said: "For several months demand for stock has been approximately 40% above our normal monthly average. Had the properties been available, our lettings tally during July would have exceeded 200. This is a phenomenon across the country as every letting agency in Scotland is incredibly busy."
He said demand was being driven by people not normally considered traditional rental customers, such as young executives, nurses, newly qualified teachers and students.
"One of the reasons for the upsurge in demand for unfurnished lettings is that increasing numbers of clients have been, or still are, home-owners with belongings of their own.
"About 50% of new rental demand now relates to unfurnished properties, whereas historically 90% of rental requests had been for furnished flats and houses. As a result, there is now little or no difference between what it costs to rent a furnished and unfurnished property."
Alexander said some home-owners who had sold their previous homes had no choice but to rent. "We even have successful sellers moving to rented accommodation, happy to see the proceeds of the sale earning 6.5% interest. They are in no rush to move back to being owner-occupiers as they seem to think that prices will fall further before they start to rise again."
Colette Murphy, director at Braemore, which has 800 rental properties in Edinburgh, said: "There are a lot of people looking to rent in the short term while they wait for the market and economic climate to improve. We've seen a growing demand for rented accommodation from people who have been advised by estate agents and solicitors to sell their property first before purchasing another.
"The properties they are demanding are usually unfurnished as the families moving into them already have their own furniture and are looking for somewhere they can settle in the short-term before buying a new home of their own."
Others moving to the city for two or three-year periods were also deciding to rent rather than buy. "They see renting as less hassle than buying a property, while others are put off from moving onto the city's property ladder in the current economic climate."
In Glasgow, Clyde Property, one of the country's largest estate agents, said it had been "under seige" from prospective tenants with access to home loans slumping 40% across the UK. Chairman Bill Cullens said he had never seen such interest in the letting sector in 40 years.
The surge has pushed up rents by an average of 5%. The Citylets agency says the average monthly rent for a two-bedroom flat in Edinburgh is now 676, up 5.6% on the same period last year. The Edinburgh rental figures put a two-bed rent ahead of Glasgow, at 573, but below Aberdeen, at 822, which has a strong rental sector based on the oil industry.
The slump in the housing market in Scotland, with the number of sales down 40% this year, has led some builders of new flats to make properties built for sale available for rent. Both Clyde Property and DJ Alexander are in talks about taking hundreds of new, unsold flats onto their letting lists.
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