RICS residential lettings survey for England, Wales and Scotland for three months to the end of January 2005.

Demand for rented property continues to rise, though at a slower pace according to Royal Institution for Chartered Surveyors’ (RICS) latest lettings survey, published today (1 March). This is due to more stable conditions in the UK housing market.

The quarter saw the weakest growth in tenant demand for rented property since October 2002. 13% more chartered surveyors report a rise in demand, down from 23% in the previous quarter. Demand for houses is outstripping that for flats by a wide margin, indicating a degree of continued uncertainty in the sales market for family homes.

Rents are also increasing for the third consecutive quarter, although at a slower pace. Rent increases were spread across all regions, with the largest rises recorded in London and the North of England.

Surveyors remain optimistic about the future outlook for rents with 17% predicting a rise over the next quarter. Confidence remains highest in London with a positive outlook also reported for Wales, the North and the Midlands.

New instructions are rising, though at the slow pace seen over the past year. Although new investment activity has slowed, there are few signs of landlords bailing out of the sector. The proportion of landlords choosing to sell their investment properties after tenancy expiration remains almost unchanged, dropping 0.1% to 7%.

Gross yields appear to be at a turning point with only 1% of surveyors reporting a decline. The RICS expects tenant demand for property and rents to continue rising in 2005, raising investors’ rental returns. However, these are still likely to lag behind the cost of mortgages.

According to RICS spokesperson, Jeremy Leaf:

‘It looks like any signs of panic in the housing market are largely over, bringing stability to the lettings market. However, many people may still be wary of buying in the current climate - which bodes well for tenant renting.

‘RICS figures suggest the reduced capital growth is not causing impulse selling and that landlords are perhaps becoming more sophisticated as they place more value on the long-term benefits.’