Property price fears fuel growth in rentals

Demand for rental accommodation is outstripping supply at the fastest rate for six years as fears grow that further increases in interest rates may trigger a property price crash.

Letting agents say rental demand has exceeded all expectations this summer and the trend is widely expected to continue for the next year.

The Association for Residential Letting Agents (ARLA) says the level at which demand from tenants is outstripping supply from landlords is at its highest since they began conducting surveys about six years ago.

“Everyone has their own theories as to why this is,” said ARLA spokesman Malcolm Harrison. “Part of the reason is down to simple demographics because there are more single people looking for housing. But it is probably also to do with a fear of house prices softening.”

The UK housing market has remained buoyant despite a series of interest rate rises from the Bank of England but the number of properties available to rent has been reduced as buy-to-let investors reallocate assets away from property.

“Landlords are leaving the market and investing elsewhere because they feel it’s a good time to make the most of their capital,” said Tim Hyatt, head of UK lettings at Knight Frank estate agents.

“We have seen a 15 per cent reduction in instructions this year and this is indicative that people are feeling uncertain about where the house sales market is going.”

Fears of a slowdown or potential housing market crash have led more people to eschew purchasing a property in favour of renting.

Across the country letting agents say they have seen a huge rise in rental agreements this year with central London witnessing the greatest growth of activity.

Summer is traditionally a busy time for letting agents as graduates, relocated professionals and families moving to prime school catchment areas, vie for rental accommodation.