Housing market remains weak as landlords leave and buyer demand falls

The rental market remains constrained by a lack of supply as some landlords choose to leave the sector.

The latest RICS UK Residential Survey for July 2026 points to a subdued housing market, alongside continued shortages in rental stock.

Landlord instructions remained firmly negative at -27%, with survey feedback indicating that some landlords are reducing their portfolios or exiting the rental market altogether.

Tax and regulation still deter investment

According to the data, tenant demand was broadly flat in the three months to July, with a net balance of -1%, down from +12% previously.

However, despite softer demand, expectations for rents remain firmly positive. A net balance of +28% of respondents expect rents to rise over the next three months, compared with +25% previously.

RICS member comments from across the country repeatedly voice concerns that taxation, regulation and affordability are influencing landlord and tenant behaviour.

One member of RICS told the survey: “Demand continues to outstrip supply. Good property lets almost immediately with minimal voids, but new landlord instructions remain hard to secure. Rents are firm and edging upward. Tax and regulation still deter investment, though the ruling out of rent controls removes one uncertainty”.

Tom Bill, head of UK residential research at Knight Frank said the RICS survey reveals a dramatic drop in supply.

He said: “The Renters’ Rights Act appears to be doing the opposite of what was intended by increasing the financial squeeze on tenants. Supply has fallen and asking rents have risen as landlords face greater financial risks under the new legislation, which for now is proving largely counter-productive.

“Future changes to the minimum energy performance of rental properties may aggravate the situation unless implemented with care.”

Housing market remains subdued

In the sales market, the summer slowdown continued in July, with new buyer enquiries recording a net balance of -28%, unchanged from June. While still firmly negative, this represents an improvement from the recent low of -41% recorded in March, suggesting that the pace of deterioration in demand has eased.

Meanwhile, agreed sales registered a net balance of -30%, also unchanged from the previous month and somewhat less negative than the -37% recorded in April.

The national house price balance came in at -30%, a marginal improvement from -32% in June and the recent low of -35% in April.

RICS chief economist Simon Rubinsohn explained that while a summer slowdown is not unusual in the property market, a combination of wider economic and political factors is continuing to weigh on sentiment.

He said: “The housing market remains subdued, and while that is not usual over the summer months, it is clear from the RICS seasonally adjusted data, that the combination of geopolitics, the domestic political climate and the cost of mortgage finance are continuing to weigh on sentiment.

“Significantly, the forward-looking metrics also remain downbeat, which is not the sort of climate likely to encourage housebuilders to step on the gas on existing sites or in land-buying, as highlighted in recent trading statements from developers.”

Regional differences remain significant

The data also reveals regional differences remain significant. London, the South East and South West continue to report more negative price balances than the national average, whilst respondents in Northern Ireland continue to report rising prices.

After a sustained period of stronger growth, price momentum in Scotland also appears to be flattening.

Expectations for prices over the coming three months remain weak, with a net balance of -31%. However, respondents are slightly more positive over a twelve-month horizon, with the balance standing at +4%.

London stands out as an area lacking confidence, with year-ahead price expectations deteriorating to -23% in July, from -10% previously.

Industry reaction to RICS survey

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Although thankfully not as quiet as a few months ago, the market is not seeing signs of a ‘Burnham Bounce’ – yet.

“It may be down to the time of year, but fewer listings mean the relatively low number of proceedable buyers have less choice, which is slowly increasing the pace of decision making.

“However, the market remains price sensitive so generating buyer traction remains challenging, particularly while uncertainty about possible mortgage rate increases continues.”

Gareth Lewis, deputy CEO of specialist lender MT Finance, said “The market is still stagnant with little movement and low transaction volumes. With a lack of competitive tension in many transactions, property prices aren’t shifting much either way. If you get the right property in the right location then this is not the case, but few meet this criteria.

“The market still badly needs some stimulus and requires more people to transact. Interest rates were expected to fall this year but that outlook has changed with the Bank of England holding base rate for several months. It is not an easy market.”