Hopes of a housing market recovery look distant as renters cling on

PROSPECTS of a housing market recovery remain distant as potential buyers are forced by a sluggish lending market to continue renting, property experts have claimed.

Activity in the rental sector has shown little sign of picking up in the early weeks of 2010, with unprecedented numbers of tenants extending their leases when their contracts expire. David Alexander, owner of DJ Alexander residential letting agency, said just 50 of the firm's properties were vacated in January, compared to a typical monthly turnover rate of around 125.

"Effectively, this means that the number of tenants who normally vacate our managed properties every month has fallen by 60 per cent," he said.

"In 27 years in the business I have never known such a large proportion of tenants asking for extensions or renewals when their leases come to an end."

Richard Murray, director of Murray & Currie property sales and lettings in Edinburgh, has reported a similar trend. Three years ago most tenants would move on at the end of their six-month contract, but with lending to first-time buyers still restricted the majority now continue renting.

"People are now moving into properties and making it their home for a couple of years", he explained. "A lot of young professionals are staying after six months instead of buying because they are struggling to secure finance to buy a property."

Recent research produced for The Scotsman by property data group Hometrack found that Scots buying their first home had to put down an average deposit of 24,573 last year, compared with 9,738 two years ago – a 154 per cent hike.

Scottish first-time buyers have fared worse, with the average deposit in England and Wales up by a less-steep 129 per cent.

The low turnover of tenants suggests a housing market recovery may be some way off, believes Alexander, who said the majority of tenants would previously have vacated rented accommodation within a year in order to get a foothold on the property ladder.

"Our statistics strongly suggest that people are, at present, either finding difficulty in obtaining mortgages to buy a home or are not taking up offers of loans on the presumption that house prices will stay low for some time yet – and perhaps may even fall further," he said.

The sluggish property market also continues to frustrate "reluctant landlords" who have rented out their homes after being unable to sell. Some have put their homes back on the market once they have been vacated by tenants, only to be forced to retain their landlord status, noted Murray.

"A lot of landlords have asked us not to put their property up for let again once tenants have left, so they can go back on the market. But they are going back to letting because they are not able to sell, especially in the one– and two-bed market," he said.