UK rents could continue rising as strong tenant demand meets a limited supply of available rental properties, according to the latest market assessment from the Royal Institution of Chartered Surveyors (RICS).
The organisation’s August survey found that demand from tenants remained positive, while the number of landlords bringing properties to the market continued to fall. The tenant demand net balance stood at +18%, compared with a -14% balance for new landlord instructions.
This imbalance between demand and supply is continuing to put upward pressure on rents across the private rented sector.
Rental Growth Expected to Continue
Expectations for further rent increases have strengthened.
The proportion of RICS respondents expecting rents to rise over the next three months increased to a net balance of +44%, up from +33% in July.
Looking further ahead, survey respondents expect UK rents to increase by approximately 3% over the next year.
The figures suggest that tenants could continue facing higher housing costs, particularly in areas where the supply of available rental properties remains restricted.
Sales Market Shows Signs of Improvement
The picture in the sales market was somewhat more positive, although conditions remain challenging.
Buyer demand and agreed sales both moved away from their recent lows in August. However, both measures remained in negative territory, indicating that the market has yet to return to strong growth.
New buyer enquiries recorded a net balance of -19%, marking the fifth consecutive monthly improvement and the strongest reading since January.
Agreed sales also improved, reaching -17%, compared with a low of -38% in April.
Expectations for sales activity over the next three months improved from -13% in July to -3% in August, bringing the measure closer to neutral.
Looking 12 months ahead, the net balance of respondents expecting sales volumes to increase rose from +3% to +6%.
House Prices Still Under Pressure
Despite the improvement in activity, house prices remain under downward pressure.
RICS’ headline price balance edged up slightly from -29% in July to -28% in August. While still negative, this continues the gradual improvement from April’s reading of -35%.
Survey respondents nevertheless expect prices to fall over the next three months, while the outlook for the following year remains broadly unchanged.
Regional conditions continue to vary considerably.
London remains weaker than the national picture despite some improvement during August. Northern Ireland, meanwhile, continued to record rising prices, while the North West of England maintained a period of modest price growth.
Limited Supply Could Remain a Problem
The supply of properties coming to the sales market also showed little change.
The net balance for new sales instructions was 0% in August, compared with -2% in July.
However, the market appraisals balance remained at -17%, suggesting that activity was still below the level seen a year earlier.
This could limit the number of properties entering the market in the near term, particularly if potential sellers remain cautious about economic conditions.
For the rental market, the continuing lack of landlord instructions presents a different challenge. With tenant demand remaining positive and fewer landlords adding properties, competition for available homes could remain high.
Interest Rates and the Budget Add Uncertainty
RICS Head of Market Research and Analysis Tarrant Parsons said the August results suggested the property market was gradually becoming more stable, but warned that any recovery remains fragile.
One concern is the outlook for borrowing costs. Renewed volatility in global energy markets and a more hawkish stance from the Bank of England could create further uncertainty around interest rates.
The upcoming October Budget is another potential source of caution.
Speculation about possible changes to property taxation could influence decisions made by both buyers and sellers, particularly those already considering whether to enter or leave the market.
What Does This Mean for Landlords?
For landlords, the latest RICS figures point to continued demand for rental properties, but also highlight the ongoing shortage of supply.
With tenant demand remaining positive and landlord instructions still in negative territory, competition for available homes could continue to support rental growth.
The expected 3% rise in rents over the next 12 months also suggests that rental income may continue increasing, although landlords will still need to consider mortgage costs, taxation, regulation and other operating expenses.
For buyers and sellers, the improving sales indicators offer some encouragement, but the market remains sensitive to interest rates, taxation and wider economic developments.
Overall, the RICS survey paints a mixed picture: the sales market is showing tentative signs of recovery, while the rental sector remains under pressure from strong demand and limited supply.
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