Overview: Is now the right time to start renting?

Just as everyone else is starting to take a more sober view of the property market, landlords have reason to feel much chirpier than of late.

Just as everyone else is starting to take a more sober view of the property market, landlords have reason to feel much chirpier than of late. Indeed, at Hamptons International they are suggesting that, in some areas, "rejoice" is not too strong a word. An oversupply of properties of more than 40 per cent in February fell to 14 per cent last month.

But it is in the country that the picture has changed beyond all recognition. Instead of being negotiated into a corner by tenants who know they have the upper hand, the landlord can now pick and choose. In Sunningdale, Berkshire, for instance, Hamptons is warning relocation agents that if they dither too long, they could find themselves gazumped. And in Esher, in Surrey, there is a "desperate shortage of good quality stock".

This appears to have been the result of a convergence of several trends. In the Surrey commuter belt, it can be put down to the reappearance of corporate lets; the seasonal rush for people to be settled before the start of the new school year; and the new uncertainty in the sales market provoked by higher interest rates and the warning from the Governor of the Bank of England about the danger of a collapse in prices.

Chris Graham, marketing director of Hamptons International, notes that there is a definite wait-and-see contingent among the current batch of tenants. "There is no doubt that some people are nervous about buying at the moment. Those who have sold at what they believe to be the top of the market intend to sit on their money until the end of the year, by which time they anticipate prices may have fallen. But apart from these 'in-betweeners' from choice there are plenty who simply can't find anywhere to buy."

This gives those who are moving into a new area a good opportunity to test the waters first, even though they are aware that the competition for a good house to rent will be replayed on the buying field at a later stage.

In the buy-to-let arena, Paragon Mortgages have seen investors getting better rental returns for their money for the third month in a row in London and the south-east. So far this year, the yields in the capital have risen from 6.42 per cent in February to 6.95 per cent in May with investors in the south east as a whole enjoying slightly less at 6.66 per cent.

Part of the reason for these increases is the lower prices that landlords are paying for their properties. John Heron, Paragon Mortgages' managing director, says, "The average price for a rental property bought in London in May was £229,899, down from £237,950 in March."

The latest report on the lettings market from FPDSavills tells the same story. The long-awaited recovery is underway and after two years of falling or static rents across much of the country, there is an increasing demand from tenants. The obsession with having to purchase appears to be diminishing.

"Contrary to popular belief, renting is not a bad option for would-be first time buyers," according to Richard Donnell, head of residential research at FPDSavills. "Limited growth in rents and strong rises in average residential values have shifted the balance between renting and buying."

Furthermore, he points out that now it can be cheaper to rent a typical city centre flat than to buy one. "In central London, for example, it can be up to 30 per cent cheaper to rent rather than buy, with a saving of up to £5,000 a year."

There is a sting in the tail, though, warns Donnell. Instead of worrying about the weak rental market, our anxiety will be focused on the sales market bemoaning the fact that its rich returns will be a thing of the past.