0:01 AM, 8th May 2025, About 9 months ago 1
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The UK’s housing sector is under increasing pressure, with buyer interest waning and rental supply shrinking, according to the Royal Institution of Chartered Surveyors (RICS).
Its latest residential market survey for April points to economic uncertainty.
Also, the recent end of a stamp duty holiday has dampened activity, while tenants face rising rents due to persistent supply shortages.
In the rental market, tenant interest surged in the three months to April, with a net balance of +14% of surveyors reporting stronger demand, up from a near-flat +3% in the previous quarter.
However, the supply of rental properties continues to contract, with a net balance of –26% noting fewer landlord instructions, worsening from –19% previously.
This mismatch is expected to push rents higher, with a net balance of +25% anticipating price increases over the next three months.
RICS’ chief economist, Simon Rubinsohn, highlighted the rental market’s challenges, stating: “More problematic, however, is the negative feedback in the survey around supply in the rental market.
“With demand continuing to grow, there appears little relief in store for tenants in terms of the upward pressure on rents.”
He added: “Critically, even with the rise in the build to rent sector, the shortfall of affordable rental stock looks set to remain substantial.”
In the sales market, conditions remain subdued as buyer enquiries fell for the third straight month, with a net balance of –33% reporting reduced interest.
The drop was driven by affordability constraints and stricter borrowing conditions.
Agreed sales also declined, with a net balance of –31% indicating weaker activity, the lowest since August 2023’s –42%.
Mr Rubinsohn attributed much of this slowdown to the stamp duty holiday ending in March, saying: “Although geopolitical developments haven’t helped the mood music in the residential market over the past month, the main reason for the dip in the key RICS sales activity metrics lies in the expiry of the stamp duty holiday at the end of March.”
Looking ahead, the outlook remains cautious, with a net balance of –15% expecting sales to dip further in the next three months.
However, longer-term sentiment is more upbeat, with +17% anticipating a sales recovery over the next year, an improvement from +11% in March.
House prices showed slight weakness, with a net balance of –3% reporting a marginal decline, down from +2% in March.
While near-term price expectations are subdued, with –21% foreseeing downward pressure, the longer-term view is more positive, with +39% expecting price growth over the next 12 months. Supply conditions, however, remain stagnant, with new instructions to sell holding steady at a net balance of +6% and property appraisals showing only modest growth.
Tom Bill, the head of UK residential research at Knight Frank, said: “The unintended consequences of the Renters’ Rights Bill are becoming more apparent as supply gets tighter.
“A piece of legislation designed to protect tenants may ultimately push rents higher as some landlords decide to sell.
“Together with tougher green regulations and higher mortgage costs, it means the choice for tenants is narrowing.”
Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “Over the past month or so, we have noticed considerably more tenant interest but a resistance to paying higher rents.
“However, lack of supply, particularly of one- and two-bedroom flats in more popular areas, often prompted by landlords deciding not to renew, is preventing a more marked downturn in values.
“Looking forward, we do not expect much improvement in stock shortages, particularly as the Renters’ Rights Bill nears the statute book so the imbalance with demand is likely to continue.”
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Member Since May 2018 - Comments: 1963
17:08 PM, 8th May 2025, About 9 months ago
The quote here that “A piece of legislation designed [I think this means intended] to protect tenants may ultimately push rents higher as some landlords decide to sell” severely understates the picture.
The government recently increased both the minimum wage and also employers’ national insurance causing some commentators to claim that Rachel Reeves will miss her fiscal rules by £63 billion:
https://www.standard.co.uk/news/politics/rachel-reeves-economy-fiscal-rules-budget-chancellor-tax-b1226465.html
Nobody competent and genuinely committed to economic growth would have done this in an economy like the UK in 2024/2025 as they can be predicted to cause the economy to stagnate; but these proposals also make it more difficult for the construction sector to build properties. If the government increases the minimum wage then businesses also have to increase the differential between those on minimum wage and other staff in order not to cause a problem with retention, and the increase in NI on all of that is a big extra bill for all private sector businesses, including builders.
At the same time the government handed out above inflation public sector pay rises well above inflation leading to a decline in public sector productivity that along with the increase in NI is primarily paid for by the private sector:
https://www.telegraph.co.uk/business/2025/05/08/public-sector-productivity-worsens-despite-huge-pay-rises/#:~:text=Public%20sector%20productivity%20dropped%20last,of%200.2pc%20in%202023.
This creates massive additional pressure on the public finances.
The government also recently introduced a deal with Serco to house asylum seekers: Serco are competing for a finite (and insufficient) supply of private residential accommodation. It is likely that with the advent of the RRB in its proposed form some landlords will now find it more feasible to rent to Serco than find and screen their own tenants, run an HMO, or provide student accommodation (given that students aren’t in a property 365 days per annum). The proposals in the RRB will mean that the Serco contract may be more attractive to more landlords who might otherwise not have considered it or may have had reservations about it previously.
In addition the Renters Rights Bill bans landlords from accepting offers above the advertised rent.
https://www.gov.uk/government/publications/guide-to-the-renters-rights-bill/guide-to-the-renters-rights-bill#:~:text=End%20the%20practice%20of%20rental,offers%20made%20above%20this%20rate.
Historically many small portfolio landlords held rents down a bit to minimise the risk of void periods and encourage long-term tenancies. The rent controls introduced by the SNP in Scotland to limit rent increases simply meant that landlords maximised rents for new lets rather than hold them down. This proposal in the RRB has a similar effect because it means that landlords will advertise properties for the maximum value; and this in turn will drive rents up.
There are of course other proposals that already increase costs for landlords and all of the above come on top of the fact that small portfolio landlords cannot offset their interest rates against rents any more, meaning that more have to raise rents higher either to avoid losing on their properties.
Bottom line is, if you don’t need to interfere with the market then don’t do it: “Renters RIGHTS…” might have been an attention-grabbing headline for politicians trying to climb the greasy pole but the unintended consequences are actually going to hurt tenants.