Surge in residential lets despite fewer executive postings to cities

RESIDENTIAL property rentals have soared despite slowing corporate demand for accommodation to let, according to a new report.

The number of new property rentals achieved in the three months to the end of August by DJ Alexander, a letting agency which operates in Edinburgh and Glasgow, was 648.

Monthly average lettings by the Edinburgh office for June, July and August topped the 150 mark, while in August the smaller Glasgow operation secured its best ever monthly total with 70 lettings.

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According to owner David Alexander, the figures not only show that the letting market remains buoyant but they also hint at wider economic trends.

He said: "Although demand is healthy, new leases have involved mainly flats at the smaller end of the square footage scale – one-bedroom and compact two-bedroom flats.

"At the top end of the market, it is becoming increasingly difficult to achieve house and flat rentals at above the 2,000 a month level."

He said demand for more expensive properties was largely business-driven. The lack of activity in that part of the rental market is a sign of a slowdown in activity by banks and other commercial institutions, he added. The trend is for fewer executives to be posted to Edinburgh and Glasgow from elsewhere in the UK and overseas. But Alexander said there are still opportunities for landlords at the top end of the market who are prepared to be "realistic" on rent.

The firm put a four-bedroom townhouse in Edinburgh's New Town on the rental market at 2pm on Tuesday at a rental of 1,800 a month and it was let within two hours.

As for the buoyant lower end of the market, Alexander said that average monthly rentals on new leases signed in June, July and August, were 808, compared with 892 in the same period last year. But he said it would be a mistake to infer from this that rentals are getting cheaper. Instead, smaller, and therefore less expensive, properties are becoming a larger proportion of all letting.

"All property indices would show average rents holding up very well. In fact, the relatively large number of owner-occupiers letting out 'difficult to sell' properties is keeping rentals lower than they would be otherwise," he said.

The surge in popularity of smaller flats is a sign that a significant proportion of potential first-time buyers are still being thwarted in their attempts to secure mortgage funding, according to Alexander. "Recently it has been suggested that the banks are easing their mortgage lending criteria but the strength of demand for rented property implies that there are still a lot of frustrated first-time buyers out there," he said.

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There are also signs of the house sales market picking up. Estate agency Strutt & Parker said that sales in Scotland are up 27 per cent to date in 2009 compared with the same period last year and viewing figures have increased by 48 per cent.

In the first two weeks of August, the Edinburgh city residential department put 11.5 million worth of properties in the capital under offer.

Andrew Rettie, senior partner at Strutt & Parker estate agency, said: "The statistics support the view that confidence is returning as a result of a belief that the market has bottomed out after the dramatic falls of the past two years. A further sign of stability is the growing number of homes we are selling at competitive closing dates." He added that the principal issue facing buyers is a shortage of stock. Demand is such that Strutt & Parker is often finding four or five people chasing "sensibly priced" family homes.

There has also been a jump in the past month in the number of people with more than 1 million to spend. The estate agency has about 200 house hunters on its books who are looking to buy a property in Edinburgh for 1m or more.