Page last updated at 10:36 GMT, Thursday, 22 May 2008 11:36 UK

Sales slowdown lifts buy-to-let

Estate agents' signs
Landlords are hanging onto properties until the credit crisis blows over

The downturn in property sales is having a positive effect on buy-to-let, a survey from the Royal Institution of Chartered Surveyors (Rics) suggests.

With people putting off buying a home, demand for rented property rose at its fastest pace since July 2007, it said.

That extra demand has pushed up rents. Gross yields rose at the quickest rate since the survey started in 1999.

However, with property selling more slowly, Rics said that the number of homes up for rental had also jumped.

This could see rents fall over the longer term, should the supply of properties outstrip demand, analysts said.

Rics said it saw instructions to let property rise by 29% in the three months to April. This compared with a 2% fall in the previous three months.

"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.

Rics said 28% more of its surveyors reported an increase in new tenant lettings than a fall, compared with 17% in January.

Rent rises

Rics said 23% more UK surveyors reported a rise in gross yields, compared with 5% in the previous quarter. It added that gross yields were now increasing at their fastest pace since the survey began 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 obtain 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.

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