UK home-letting demand rose at the slowest pace in two years

UK home-letting demand rose at the slowest pace in two years in the quarter through April as more people bought their homes and moved out of rented accommodation, a survey by the Royal Institution of Chartered Surveyors (RICS) showed.

A balance of 16 per cent of surveyors reported higher demand for residential lettings, the lowest figure since the first quarter of 2005, RICS said yesterday. That’s down from 28 per cent in the three months through January.

Mortgage approvals climbed to the highest since 2003 in November as the prospect of higher interest rates prompted more Britons to buy their own homes, according to RICS. The Bank of England has raised the UK’s benchmark rate three times since then, taking it to a six-year high of 5.5 per cent this month.

‘Many recent homebuyers moved into their new properties during the first quarter and therefore no longer needed to rent,’ said RICS, adding that the slowdown was ‘evenly distributed’ across the UK.

Investors are betting that the Bank of England will boost borrowing costs again before the fourth quarter. The implied rate on the September interest-rate futures contract was 6.04 per cent at 8:05 am in London. The contract settles to the three-month London interbank offered rate for the pound, which averaged about 15 basis points more than the central bank benchmark for the past decade.

Rising property prices and higher interest rates also encouraged more landlords to sell their houses, according to RICS. The number of investors selling their properties rose more than one percentage point to 5.2 per cent in the quarter to April, the highest in two years.

‘Many landlords are selling into a tight housing market in light of falling gross yields and rising borrowing costs,’ the RICS report showed. The average cost of a home in England and Wales climbed an annual 6.8 per cent, the most in almost four years, according to a survey by Hometrack Ltd.

Source: The Business Times, 31 May 2007