March 15, 2024 2:09 pm

Insert Lead Generation
Nikka Sulton

In the recent market snapshot released by the Royal Institution of Chartered Surveyors (RICS), there’s a notable trend of increasing tenant demand, although the rate of growth appears to be more moderate compared to previous periods. This suggests a steady but somewhat tempered appetite for rental properties among tenants. However, the report also highlights a concerning trend of dwindling landlord instructions, indicating a potential tightening of supply in the rental market.

Despite the subdued growth in tenant demand, the continued decline in landlord instructions is likely to exert upward pressure on rents in the foreseeable future. RICS members anticipate rents to trend higher over the coming months, albeit at a slower rate compared to previous periods of rapid growth. This suggests a market environment where rental prices may continue to rise, albeit at a more gradual pace, as the supply-demand dynamics in the rental sector continue to evolve.

Simon Rubinsohn, RICS’ chief economist, offers valuable insights into the current state of the rental market. Despite indications of a moderation in the relentless upward trend of private rents, the balance between demand and supply remains skewed. This persistent imbalance suggests that tenants may not see significant relief from escalating rental costs in the near term. Moreover, the feedback from survey respondents underscores the ongoing challenges within the sector, which have been exacerbated by a multitude of regulatory measures implemented in recent years. These challenges highlight the complex dynamics at play and emphasize the need for both tenants and landlords to navigate the evolving rental landscape with caution.

Rubinsohn’s observations shed light on the nuanced dynamics shaping the rental market. While there are signs of a slowdown in the rate of rent increases, the underlying imbalance between demand and supply continues to exert pressure on rental affordability. This prolonged imbalance underscores the need for policymakers and industry stakeholders to address structural issues within the rental market to ensure greater affordability and stability for tenants. Moreover, the ongoing challenges highlighted by survey respondents underscore the multifaceted nature of the issues facing both landlords and tenants, from regulatory compliance to market uncertainties. As such, a comprehensive approach that addresses both short-term concerns and long-term structural challenges is essential to foster a more balanced and sustainable rental market for all stakeholders involved.

The latest findings from the RICS survey paint a more optimistic picture of the current sales market compared to the majority of the previous year. Despite this, there remains a sense of caution in the short term, primarily stemming from concerns that the recent decline in mortgage rates may come to a halt. This apprehension is compounded by ongoing uncertainty regarding the timing and pace of interest rate reductions, contributing to a somewhat reserved outlook among market participants.

On a national scale, the data reveals that new buyer enquiries have remained positive for the second consecutive month, indicating a sustained upward trend in buyer demand. With a net balance of +6%, there is evidence of continued interest from prospective buyers, suggesting a degree of resilience within the market despite prevailing uncertainties. Moreover, the report highlights that many regions across the UK have experienced a resurgence in buyer interest over the last two months, signaling a potential recovery in market sentiment and activity.

Looking ahead, while the near-term outlook remains cautious, there are indications of growing optimism within the sales market. Factors such as the ongoing recovery in buyer interest across various regions and the sustained positive trajectory of new buyer enquiries at the national level provide reasons for cautious optimism. However, challenges such as uncertainties surrounding interest rate movements and broader economic conditions underscore the need for vigilance and adaptability in navigating the evolving landscape of the sales market.

In February, agreed sales remained stagnant, showing a net balance of -3%, which although less optimistic than January, indicates a stronger sales trend compared to most of the preceding 12 months, where the average net balance stood at -22%. Looking forward, sales expectations for the near future are positive, with forecasts suggesting further momentum in sales activity over the coming year, boasting a net balance of +42%. Moreover, respondents across all UK regions anticipate a pickup in residential sales activity in the longer-term outlook.

A notable highlight in the February survey was the significant increase in new instructions to sell, marking the strongest reading since October 2020, a stark contrast to the consistently negative trend observed throughout 2023. Average stock levels held by estate agents have risen to 42 properties, the highest since February 2021, with respondents noting a surge in market appraisals compared to the same period last year.

Although house prices continue to exhibit a downward trajectory across the UK as a whole, the rate of decline appears to be stabilizing, with February recording the least negative figure since October 2022. In London, the shift in the price indicator is slightly more pronounced. Looking ahead, a net balance of +36% of respondents across England and Wales anticipate house prices to resume growth within the next 12 months.

Simon Rubinsohn, RICS’ chief economist, emphasizes the importance of sustained stock increase in shaping the market dynamics for the remainder of the year, particularly with new build supply expected to remain constrained. The surge in market appraisals offers a promising outlook, with the government’s change to Capital Gains Tax (CGT) announced in the Budget likely to further encourage landlords to consider selling their properties, potentially bolstering the market further.


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