Rental home shortage drives up rents as the property market stalls – RICS

Britain’s private rented sector is facing mounting pressure as landlords continue leaving, driving rents up while the broader housing market experiences continued weakness, the latest RICS research reveals.

The organisation’s August residential survey of surveyors shows that landlord instructions have plummeted by 37% – the sharpest drop since April 2020.

The fall coincides with sustained tenant demand and RICs is predicting that rents will rise this year 3% over the next 12 months as a result.

Russell Anderson, the commercial director of mortgages at Paragon Bank, said: “A decline in landlord instructions noted by surveyors is further evidence that supply is failing to meet the continuing demand for privately rented homes.”

Landlords need government help

He warned of broader economic consequences and added: “Survey respondents also anticipate further rent rises, a primary symptom of this imbalance between supply and demand.

“In addition to making it harder for would-be buyers to save towards their first home, undersupply of rented property also limits the choice of homes available to tenants.”

Mr Anderson went on: “This has a negative indirect impact on the economy as rented accommodation provides flexibility that enables people to move for work or study with minimal friction.

“To address this, we need to ensure that investment in the private rented sector remains viable.

“That means creating an environment where landlords feel confident to grow and maintain their portfolios to the high standards that renters rightly expect.”

Tenants hit affordability ceiling

Jeremy Leaf, a north London estate agent and former RICS chairman, said: “We have noticed recently many tenants appear to have reached an affordability ceiling just as we are approaching the busiest time of the year for lettings activity.

“Many are finding it increasingly difficult to meet what they perceive as unrealistic landlord aspirations for new and renewed rents despite the ongoing drop in stock partly prompted by landlords leaving the sector.”

He added: “One- and two-bedroom flats remain in most demand and shortest supply.”

Housing market is struggling

The RICS survey also shows that the housing market shows little sign of recovery, with buyer interest, completed transactions and available stock all experiencing pressure.

Fresh buyer enquiries dropped by 17% in August, down from 7% in the previous month.

Completed sales performed worse, sliding 24% from 17% in July.

Industry professionals are anticipating transaction volumes to remain static throughout the next quarter.

House prices are falling

Property values are also struggling, surveyors say, with the overall price gauge reaching -19%.

Regional variations show stark contrasts, with East Anglia reporting -64% and the South West -46%.

Northern Ireland stands alone in recording price growth.

New property listings fell by 3% – the first negative figure since June 2024 – indicating reduced fresh market supply.

Sale volumes are flat

The short-term projection is that house prices will continue to fall, while sales volumes are expected to remain flat.

However, the 12-month forecasts show modest price recovery, though expectations have also fallen compared to earlier yearly predictions.

Tarrant Parsons, the head of market research at RICS, said: “With buyer demand easing and agreed sales in decline, the housing market is clearly feeling the effects of ongoing uncertainty.

“Concerns over the wider economic and fiscal outlook, combined with questions around the future path of interest rates amid stubbornly high inflation, are weighing on sentiment at this time.”