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Sellers ride out crunch with switch to lettings

Many homeowners are choosing to rent out their properties after struggling to sell in the current market, according to the Royal Institution of Chartered Surveyors.

The lettings survey by RICS reveals the net balance of chartered surveyors reporting a rise in new landlord instructions, which is a supply indicator, rose to 29 per cent in the first quarter of this year compared with -2 percent in the previous quarter.

The report shows that a significant drop in demand in the housing market has pushed sellers into the rental market.

Demand for family homes and flats increased in the first quarter as many would-be buyers found themselves unable to get onto the property ladder.

RICS suggests that rising yields have stopped the recent retreat of landlords from the market.

The report states: “Many are taking advantage of rising rental yields while they wait for the effect of the credit crunch to abate. Landlords are reaping the benefits of a collapse in demand in the housing market.”

Rents are still rising and rental expectations remain at more than double the average, according to RICS, which identifies the South-east and South-west as key areas enjoying rental growth while London is the weakest.

RICS spokesman James Scott-Lee says: “The sales market’s loss is the lettings market’s gain. 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.

“Transaction numbers in the sales market are weak but many are taking advantage of rising rents and yields in the private lettings sector.

“With rental expectations high, landlords will continue to enjoy this increasingly lucrative market. Fears that the change in capital gains tax would bring a new wave of sellers have to date not been realised.”

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