An easing in the demand for rental property and a rise in the numbers of tenants struggling to meet their monthly rent payments signals that the rental market may be softening, according to some new research from the Association of Residential Letting Agents (ARLA).

In Q4 2011 just over half (55%) of ARLA members reported more tenants than properties available. While this indicates that demand is still robust, the figure is sharply down on Q3, when three quarters (74%) of members noted that positive trend.

The number of consumers actually signing a new tenancy was consistent with Q3, with an average 34 new tenancies signed per ARLA member office during each quarter. The figure was lowest in Central London, where an average 26 tenancies were signed per branch during October - December, compared with an average 31 in Q3.

Over the same period, 39.2% of members reported an increase in tenants struggling to pay their rent; up from 36.7% the previous quarter.

Tim Hyatt, president of ARLA, said: “The apparent drop in demand for rental properties could be due to the traditionally quite pre-Christmas period. At the same time, it could indicate a reversal of the surge of new tenants who turned to the PRS when they could not afford to buy.

“With household income decreasing and job uncertainty prevailing, it could be that increasing rental arrears is a sign that the wider economic malaise is having a tangible impact on personal finance – some consumers may have reached the limit of their access to finance, while others may be cutting back as many commentators have predicted.
“In tough economic conditions both landlords and tenants can find themselves struggling to keep up with rent or mortgage payments. It is therefore more critical than ever to take references and conduct thorough research before signing a tenancy agreement.