SALES SLOW-DOWN LIFTS BUY-TO-LET

Its survey of residential lettings says the number of surveyors reporting a rise in instructions to let property rose by 29% in the quarter to April.

This compares with a 2% fall in the three months before.

Weaker demand to buy houses has forced sellers back into the rental market, where yields are rising, Rics says.

“The sales market’s loss is the lettings market’s gain,” said Rics spokesperson James Scott-Lee.

“Some would-be sellers are retreating from selling and letting or re-letting their properties as they wait for mortgage lenders to offer buyers more favourable lending criteria,” he added.

At the same time people unable to step onto the property ladder or unwilling to buy while prices are falling are deciding to rent until the market improves, exacerbating yield rises.

Rics said 23% more UK surveyors reported a rise in gross yields, up from 5% in the previous quarter and gross yields are now increasing at their fastest pace since the survey began reporting them in April 1999.

This seems to be halting the recent retreat of landlords from the market.

Landlords selling their properties when tenant leases expire fell from 4.6% in the previous quarter to 4.2%, the survey showed.

The problems in the housing market were primarily the result of the credit crunch in the banking system, which caused severe damage to the balance sheets of many of the UK’s lenders.

Subsequently, they have been forced to increase credit repayments and pull many of their better mortgage deals, particularly for those without a significant deposit.

This has weighed on the ability of would-be house buyers to access a mortgage and a number of recent housing surveys have shown that lending is on a downward spiral, while house prices are also falling.

Earlier this week Rics predicted property sales could fall by 40% this year.