Buy-to-let rental boom continues

There has been no let up in the buy-to-let market, RICS says

The buy-to-let property market is still booming, despite higher interest rates, according to the Royal Institution of Chartered Surveyors (RICS).

Demand for rented property is rising as high property prices are forcing potential home buyers to remain in rented accommodation, the group said.

The result is that rents are rising at their fastest rate on record.

Meanwhile, buy-to-let mortgages have surged over the past three years as investors make the most of rent rises.

"Current economic uncertainty has created an ideal platform for buy-to-let investors to cash in on rising rental levels," said RICS spokesperson Jeremy Leaf.

"Many would-be buyers have decided to wait and see how the interest rate cycle will affect the market," he added.

Rising rents

In the past three years the number of buy-to-let mortgages in existence has nearly doubled to 939,000 - and they now comprise nearly 10% of all outstanding mortgages.

Experts have blamed rising house prices and rising rents on the continuing shortfall in new homes being built and the rapid increase in the UK's population - largely due to immigration.

The Association of Rental Letting Agents (ARLA) reported that rents have now risen to an all-time high as demand outstrips supply in all parts of the market.

The average weekly rent for a flat in prime central London is now £525 a week, with £215 a week being charged in the South East and £150 in the rest of the UK.

The growing influence of buy-to-let investors, with more financial muscle than the typical first-time buyer, helps explain why house prices in the UK are still rising briskly, despite the Bank of England having imposed five rises in interest rates since the summer of 2006.

On Monday, the Department for Communities and Local Government said UK house prices were still accelerating, rising 12.4% in the year to July - driven largely by increases in London and the South East.