Landlord exodus deepens as RICS warns of worsening rental shortage

Landlords are pulling out of the PRS at the fastest rate since the early pandemic to leave behind a growing shortage of rental homes, RICS says.

In its latest Residential Market Survey, the organisation warns that as a consequence, tenants are being facing affordability issues.

The latest data shows that tenant demand was broadly unchanged at -1%, but new landlord instructions plunged to -38%.

That’s the weakest figure since May 2020 and underlines how the gap between supply and demand continues to worsen as landlords exit the market amid increasing costs and new regulations.

Rents will climb

RICS also expects rents to climb by around 3% over the next year as fewer homes are available for rent.

It also warns that this imbalance will continue to push affordability pressures higher for tenants well into 2026.

And while the rental market tightens, the wider housing sector remains stuck in a period of subdued activity.

The RICS survey found that buyer interest weakened again in September, with new enquiries slipping to a net balance of -19%.

That marks the third consecutive month of falling demand as affordability constraints and caution continue to weigh on confidence.

Sales are falling

Agreed sales also fell, registering a -16% balance, although this represented a slight improvement on August’s -24%.

Respondents suggested that the modest uptick was unlikely to signal a turnaround, with both short-term and twelve-month sales expectations holding at -9%.

House prices continued to edge lower, with the national balance standing at -15%.

The South East and East Anglia experienced the most notable declines, while Scotland and Northern Ireland remained exceptions, posting slight price growth.

Listings are up

New listings also slowed for the second month running, recording a -15% balance.

The fall in vendor instructions suggests fewer homeowners are willing to enter the market, further dampening activity.

RICS reports that sentiment across the market is being shaped by economic uncertainty and speculation about further property taxation in the upcoming November Budget.

Many surveyors say this as a key factor behind the current caution among both buyers and sellers.

While near-term price expectations remain subdued at -21%, the outlook for the next 12 months shows a more optimistic tone, with a net balance of +12% anticipating some recovery during 2026.

Market is hesitant

RICS’ head of market research and analytics, Tarrant Parsons, said: “The housing market continues to struggle for momentum, with seemingly no clear catalyst on the horizon to spark a turnaround over the near-term.

“Buyer demand remains subdued, while agreed sales are still on a downward trend, reflecting a broader hesitancy in the market.

“Ongoing uncertainty around potential measures in the upcoming Budget is also likely adding to the prevailing cautious sentiment.”

Buyers are hesitant

Tom Bill, the head of UK residential research at Knight Frank, said: “Activity in the UK housing market has been building since April, a month when confidence was dented by higher rates of stamp duty and tariff-related turmoil on financial markets.

“Demand has been supported by stable mortgage rates and downwards pressure on asking prices due to high levels of supply.

“However, there is a creeping mood of hesitation as November’s Budget moves onto the radar and a game of ‘guess the tax rise’ takes place for the second successive year.”