House builders renting unsold homes to increase cashflow

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House builders are resorting to renting out properties they are unable to sell because of the slowdown in the residential market, the Bank of England has said.

The Bank said builders were now letting out completed properties they are unable to sell to try and improve their cashflow.

They were also offering shared equity schemes to prospective buyers and increasing sales to housing associations, it added.

According to its latest Agents' summary of business conditions report, work has ceased on many uncompleted properties, which are being mothballed in the absence of confirmed buyers.

Unsurprisingly, the volume of house building has continued to contract, and new housing starts are at very low levels.

National Federation of Builders housing spokesman Roger Humber said renting out unsold properties was a growing trend among the Federation's members.

He said: "I am very aware of the practice among house builders who are unwilling to accept losses to rent properties until investors or private buyers return to the market.

"In some situations house builders are lowering their prices in order to sell, but many who can't afford to do that are renting and waiting for the upturn."

In its September report, the Bank said the number of homes changing hands had continued to fall, with transactions around 50 per cent to 60 per cemt lower compared with a year earlier.

It said transactions that were still going ahead were increasingly forced sales, either as a result of repossession or job relocation.