Rent prices set to soar as demand outstrips supply – RICS

The rental market is facing a serious imbalance as more tenants are looking for properties than landlords are offering.

According to the latest RICS UK Residential Survey, there were 40% of respondents that reported an increase in tenant demand than a decrease in June.

However, 36% of respondents reported a drop in landlord instructions than an increase – that’s the largest fall since May 2020.

And since there are not enough properties to let for the growing number of renters, 53% of the survey participants expect rent prices to rise in the near future.

This could put more pressure on tenants who are already struggling with affordability and availability issues.

Bleak picture of the UK housing market

The survey also paints a bleak picture of the UK housing market, as sales activity and prices declined sharply in June.

The survey attributes the slump to rising borrowing costs and low consumer confidence, which have dampened demand from potential buyers.

RICS says the number of new buyer enquiries fell by 45%, the lowest level since October 2022, when it was -51%.

Also, the number of newly agreed sales dropped by 34%, the weakest figure since December 2022, when it was -38%.

House prices are falling nationally

RICS also says that house prices are falling nationally, with a net balance of -46% of surveyors reporting lower prices in June, compared to -30% in May.

The outlook for house prices is also negative, with surveyors expecting further declines over the next three and 12 months.

One interesting finding from the survey is that homes with better energy efficiency credentials are holding their value better than others, according to 58% of surveyors who expressed an opinion on this topic.

This suggests that sustainability is becoming an increasingly important factor for buyers and sellers in the housing market.

‘Activity levels are likely to remain relatively subdued’

RICS’ chief economist, Simon Rubinsohn, said: “The latest increase in interest rates and the impact this has already had on mortgage rates is clearly visible in the key RICS metrics regarding buyer enquiries, sales and prices which have all retreated over the past month. Inevitably in this environment, activity levels are likely to remain relatively subdued.

“However, an important message coming back from RICS agents is around ensuring prices are set with an eye on the market conditions of today, rather than the recent past; when this is done, sales are taking place.

“It is also worth bearing in mind that house prices are only very modestly down on their recent highs and well above where they stood prior to the onset of the pandemic.”

‘Rise in interest rates hit the market like a missile’

Commenting on the RICS’ survey results, Jeremy Leaf, a north London estate agent and former RICS residential chairman, said: “There’s no doubt the latest rise in interest rates hit the market like a missile, prompting a pause for thought at the very lease among buyers.

“However, we saw in our offices very few actual withdrawals from purchases, although we did notice some renegotiation of terms, usually including price, on nearly every sale.”

Tomer Aboody, a director of property lender MT Finance, said: “As buyers await a more stable macro market with either a possible halt to rate increases or even potentially a reduction, sellers are also waiting before putting their properties on the market.

“Afterall, why try to sell now when buyers for the most of it are not active?

“This, in turn, is leading to forced sellers selling at lower levels. Until some respite comes from the Bank of England, we will likely see the housing market stagnate.”

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