The UK rental market continues to face pressure as the supply of available homes remains limited and some landlords reduce their portfolios or leave the sector.
This is according to the latest market snapshot from the Royal Institution of Chartered Surveyors (RICS), which highlights the continued impact of taxation, regulation and affordability on both landlords and tenants.
Rental Supply Remains Under Pressure
RICS members across the country continue to report a shortage of good-quality rental properties. The organisation’s latest survey suggests that this lack of supply is becoming an increasingly important issue for the private rented sector.
Tenant demand was broadly unchanged during the three months to July, with a net balance of -1%, compared with +12% in the previous survey.
However, the number of properties being offered by landlords remains firmly negative. Landlord instructions recorded a net balance of -27%, with agents reporting that some landlords are cutting back their portfolios or deciding to leave the rental market altogether.
The continued reduction in available properties could place further pressure on tenants, particularly in areas where demand is already strong.
Rent Rises Expected to Continue
With rental supply remaining restricted, expectations for further rent increases remain positive.
A net balance of +28% of RICS respondents expect rents to rise over the next three months, up from +25% previously.
This suggests that tenants could continue to face higher rental costs if the number of homes available to let does not improve.
RICS Chief Economist Simon Rubinsohn said feedback from members continues to highlight the effect of recent regulatory changes, with the fall in new landlord instructions pointing towards further pressure on rental supply.
For landlords, the figures underline the changing conditions in the sector. Higher rents may support income for those remaining in the market, but increased regulation, taxation and operating costs continue to influence decisions over whether property remains an attractive investment.
Sales Market Also Struggling
The latest RICS report also points to continued weakness across the wider housing market.
Buyer demand and agreed sales showed little indication of a significant recovery, with RICS suggesting that the market may continue to face challenging conditions through 2026.
New buyer enquiries recorded a net balance of -28% in July. While this remains negative, it represents an improvement from the recent low of -41% recorded in March, suggesting that the decline in demand may be slowing.
Agreed sales were also negative, recording a net balance of -30%.
There was some improvement in the number of properties coming onto the market. New vendor instructions recorded a balance of -4% in July, compared with -23% in June.
However, RICS warned that the overall pipeline of new listings remains relatively limited.
House Prices Remain Under Pressure
House price sentiment also remains weak.
The national house price balance stood at -30% in July, a slight improvement from -32% in June and -35% in April. Despite the improvement, the figure indicates that more surveyors are seeing prices fall rather than rise.
There are also notable differences between regions.
London, the South East and South West continue to report weaker price sentiment than the national average, while Northern Ireland continues to see stronger price growth.
Scotland, which had experienced a period of stronger growth, is also showing signs that price momentum is beginning to slow.
Looking ahead, expectations for house prices over the next three months remain negative, with a net balance of -31%.
The outlook improves slightly over a 12-month period, where the balance rises to +4%, suggesting some surveyors expect conditions to improve over the longer term.
London remains particularly weak, with expectations for house prices over the next year falling to -23% in July, compared with -10% previously.
What Is Driving the Weak Market?
RICS says several factors are continuing to weigh on confidence across the housing market.
These include geopolitical uncertainty, the domestic political environment and the cost of mortgage finance.
Higher borrowing costs can make it more difficult for buyers to enter the market and can also affect landlords who rely on mortgages to finance rental properties.
At the same time, regulatory changes and taxation are influencing landlord decisions, contributing to the shortage of rental homes highlighted in the latest survey.
The combination creates a difficult environment for both sides of the housing market. Tenants are dealing with limited supply and the prospect of higher rents, while landlords are weighing up whether the returns from property justify the increasing costs and regulatory requirements.
What Does This Mean for Landlords and Tenants?
The latest RICS figures suggest there is little immediate sign of the rental supply problem easing.
With landlord instructions remaining negative and expectations for rent increases rising, tenants could continue to face competition for a limited number of properties.
For landlords, the figures provide another indication that those remaining in the sector may have greater pricing power, particularly in areas where demand remains strong. However, the wider pressures around regulation, taxation, mortgage costs and property maintenance could continue to influence investment decisions.
The situation also highlights the importance of increasing the supply of rental homes. Without more properties entering the market, continued demand could put further upward pressure on rents.
For now, RICS’ latest figures suggest that there is no clear end in sight for rental pressures, while the wider housing market continues to struggle with weak confidence and subdued activity.
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