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According to new statistics, UK rents fell by 1.6% in the first three months of 2009 – but there is evidence that an upturn may be on its way.

Research from Spareroom.co.uk found that the average UK rent fell 1.6% in the first quarter of 2009, a steeper drop than in the previous quarter. Admittedly, compared to a year ago rents are still 1.3% higher, but prices have been forced down in recent months as economic weakness has led to an increased supply of rental properties. In real terms, the website found that rents were down to £1,060 per month from £1,077 in the previous quarter.

Matt Hutchinson, director of research at Spareroom.co.uk, said: “Rents have dropped again as landlords face a much tougher time vying for tenants. The supply of property for rent has grown dramatically in the past few months for a range of reasons. Increasingly, frustrated homeowners – unable to sell in an unfavourable housing market – are making their properties available on the rental market. On top of that, more homeowners are taking in lodgers and existing house and flatshares are looking to fill every spare room – and forgoing the luxury of empty space they might have enjoyed in more prosperous times."

But there are signs that demand from tenants is on the rise and rents may, in turn, begin to increase in the coming months. Spareroom.co.uk found that in relation to supply, demand for rental properties fell significantly in January, but gradually began to rise over the remainder of the first part of the year.

Hutchinson adds: “Slowly but surely demand is rising and, at the same time, there is evidence supply levels are beginning to plateau. Confidence is certainly fragile in the housing market, but mortgage approvals were up again in February and this may have implications for the number of properties being made available to rent.

"It’s still too early to predict, but this may signal a reversal in the downward trend in rents."

SOURCE: Spareroom.co.uk, 17/04/09

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