Average rents in the private rented sector have soared in the first months of 2008, according to the results of the latest Aassociation of Residential Letting Agents (ARLA) Survey…

In real terms, rents have risen by an average of 4% for houses and 2% for flats in the three months to the end of February. These averages have been boosted by a 9% rise in Prime Central London and a 5% rise away from the South East. In the South East itself, rents fell slightly, by 2% for houses and 5% for flats. These figures are seen as emphasising the start of a new housing cycle

The improvement in rents received includes an increase of well over £3,000 a year for renting a house and £1,500 for renting a flat in Prime Central London. Rents have risen in the rest of the country too, from an average of £931 to £981 for houses and £619 to £664 for flats.

In the South East the average rent dropped from £1390 to £1361 a month for houses and from £ 930 to £882 for flats .In all the regions the cost of renting a house against renting a flat is around half as much again, between 48% and 61% higher.

’Beginning of the inevitable’

The Survey, with 429 letting agents responding this quarter, continues to be the largest survey of its kind for the rental market and it shows that falling asset prices are leading to higher yields as well as increasing rents. Average returns for rented houses are up from 4.8% to 5%, while flats have risen from 4.9% to 5%.

ARLA Head of Operations, Ian Potter, commented: “We are seeing the beginning of the inevitable. Whenever property prices soften or fall, rental demand, rents and yields all increase. As we begin a year of uncertainty in the sales market, it is inevitable that our member letting agents should report that they have more tenants than properties available for them.

“The supply of property in the Private Rented Sector must rise if we are to provide for immigration as well as all the other sectors of our society who want to rent. These findings show also that we urgently need to find better cross-border referencing systems if we are to satisfy landlords that they are letting to good covenant tenants.”