UK house prices fall – but rents go up

House prices in the UK have continued to fall but rents, fuelled by falling supply and increasing demand, have risen, a survey by RICS reveals.

According to the organisation’s Residential Survey for November, its members report that the flow of new homes to rent continues to dwindle – there was a net balance of -27% of members who say they have seen a decline in landlord instructions.

That means the misalignment between rising demand and falling supply continues to drive rents higher.

There was a headline net balance of +43% of contributors who are predicting that rents will increase over the coming three months – though in February, the survey revealed that 66% of members predicted rent rises.

Buyer activity continues to weaken

However, activity in the rental market is in stark contrast to the house buying market where buyer-activity continues to weaken.

Buyers are worried about higher interest rates and a difficult outlook for the economy which has led to buyer demand falling for the seventh month in a row.

RICS says the market remains in a ‘firmly downward trend’ with indications that this will continue in the near term.

For agreed sales, a national net balance of -35% was reported in November, indicating a continued decline in sales activity.

This is the second month in a row that members in every UK region reported a decline in agreed sales, demonstrating what is now a consistently negative picture at the national level.

The survey’ also highlights that new instructions coming onto the sales market is in negative territory, posting a net balance of -9% at the national level.

‘Latest RICS residential survey is understandably more downbeat’

Simon Rubinsohn, RICS’ chief economist, said: “The overall tone of the latest RICS residential survey is understandably more downbeat than previously, reflecting the uncertain macro environment and the higher cost of mortgage finance.

“However, anecdotal comments from respondents capture the very real significant divergences in market behaviour at a more localised level.”

He added: “Although the headline price balance recorded two consecutive modest monthly falls in prices, and the forward-looking series indicate that this trend will extend through the coming months, the likely ‘job-rich’ recession suggests the downturn in the housing market this time could be shallower compared with past experiences.

“Meanwhile, the imbalance in the rental market remains significant as landlord instructions continue to fall and is consistent with further increases in rents, even if the momentum does appear to be slowing just a little.”