Market sees return of 'accidental landlord'

The Association of Residential Letting Agents said a third of its members had seen an increase in the number of properties being rented out during the third quarter because their owners had been unable to sell them.

Reluctant landlords became a phenomenon in the letting market during the 2007 to 2009 housing market downturn.

At its peak at the beginning of 2009, 94 per cent of letting agents reported seeing an increase in properties coming on to the rental market because people had been unable to sell them.

The situation then was caused by people being reluctant to accept a lower price for their property than they thought it was worth, as well as a shortage of buyers due to the mortgage drought.

The current problems in the market are being caused by potential buyers adopting a 'wait and see approach' until the outlook for both the housing market and the wider economy is clearer, while those who do want to proceed are still struggling to obtain mortgages.

Figures released by the Bank of England yesterday showed that the number of mortgages approved for house purchase had fallen for the fifth consecutive month during September, to the lowest level since February.

Ian Potter, operations manager at ARLA, said: "The rise of the reluctant landlord seems to reflect wider market uncertainty and instability. People are holding back from selling, perhaps strategically, to secure the best price, or more likely because they simply can't find a suitable buyer."

There was considerable regional variation in the level of agents who reported people were letting out their home after being unable to sell it, with 58 per cent of agents in the North East reporting the phenomenon, compared with just 15 per cent in central London.

The current uncertainty in the housing market has also led to a surge in demand for rented accommodation.

Earlier this month, ARLA said the number of people looking to rent a property had soared to the highest level since the group began its survey nearly a decade ago. The rise in renters had pushed up the cost of letting a home, as landlords struggle to meet the new demand.

LSL Property Services recently said rents had soared to a record high during September as landlords hiked the cost of letting a home for the eighth consecutive month to an average of 689 a month.