Demand for U.K. Rental Homes Gains at Fastest Pace in a Decade

By Simon Packard
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Aug. 19 (Bloomberg) -- Demand for rental homes in the U.K. climbed in the second quarter at the fastest pace in at least a decade as a slump in property prices deterred homebuyers, a report by the Royal Institution of Chartered Surveyors showed.

During the quarter, 37 percent more real-estate brokers reported an increase in new rental contracts than those that said there was a drop, the London-based industry group said. RICS members also reported the largest increase in mandates to rent out properties since the survey was first carried out 10 years ago.

Many homeowners are ``opting to rent their property while sales in the housing market continue to dry up,'' said James Scott-Lee, a spokesman for RICS, in a statement. ``Established investors have been reaping the benefits of the housing downturn for sometime.''

Average asking prices for homes in the U.K. fell by 4.8 percent in August from a year earlier, according to an index compiled by Rightmove Plc, the country's most-used property Web site. That was the biggest decline since at least 2002 as banks curbed lending and charged borrowers more.

Lending restrictions caused the number of mortgages available to homebuyers to dwindle to 3,748 at the start of August from 13,027 a year ago, according to personal finance Web site Moneyfacts.

Tax Break?

On Aug. 5, Chancellor of the Exchequer Alistair Darling left open the possibility of a temporary suspension of a tax on house sales to revive the property market. A poll of 1,350 members of the National Association of Estate Agents last week showed that a quarter reported that a sale had fallen through as vendors waited for the tax break to be implemented.

Increased demand for rented homes has helped lift rents and caused the proportion of landlords planning to sell their property to fall to the lowest level since 2003, the RICS survey showed.

The growing supply of rental properties may limit rent increases in the future, the Surveyors said.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.