Demand in rental sector may have peaked

Demand in the rental sector may have peaked, according to two new reports.

According to the Association of Residential Letting Agents (ARLA), tenant demand in Q4 2011 was still strong but was sharply down on the previous quarter, with 55% of members reporting more tenants than available properties compared with 74% in Q3.

ARLA said that, while the drop could be attributed to the traditional seasonal slowdown before Christmas, it could also signal a reversal of the surge in tenants unable to afford private sector rents, as their finances came under strain.

During Q4, 39.2% of ARLA members reported an increase in tenants struggling to pay rent, up from 36.7% the previous quarter.

Tim Hyatt, president of ARLA, said: “With household income decreasing and job uncertainty prevailing, it could be that increasing rental arrears is a sign that the wider economic malaise is having a tangible impact on personal finance.

“Some consumers may have reached the limit of their access to finance, while others may be cutting back as many commentators have predicted.

“We will be watching the market closely in the coming months to determine how significant these latest figures will prove to be.”

A second report, from the website FindaProperty, shows that rents fell 3.3% in the last quarter of last year, with available rental stock rising to its highest level since August 2009.

The site said that if stock levels continue to rise, there could be further drops in rent.

On a regional level, it said that London remains the most expensive place to be a tenant, with rental prices increasing 0.5% in a month to an average asking price of £2,086. It is cheapest to rent in Yorkshire and the Humber, where the average rent is just £558 a month.

A third new report, from LSL, also found rents dropping, but predicts more rises for this year. See the next story.