UK rental market loses steam as sales activity eyes long term growth – RICS

UK rental market loses steam as sales activity eyes long term growth – RICS

0:01 AM, 9th May 2024, About 2 months ago

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The latest RICS UK residential survey reveals a mixed picture for the UK housing market with the sales market showing tentative signs of recovery – while the lettings market is cooling down.

It says that tenant demand is losing momentum, with respondents reporting a drop in new instructions from landlords.

This lack of supply, coupled with affordability concerns, is keeping rent growth moderate with few agents expecting rents to rise – this is a three-year low for near-term expectations.

Simon Rubinsohn, the RICS’ chief economist, said: “An increasing number of respondents are also drawing attention to affordability constraints, and this is reflected in a more modest pace of rental growth.

“But a fundamental problem in the market across much of the country remains the imbalance between demand and supply with new instructions continuing to decline.”

The recent rise in mortgage rates

The survey also highlights that the recent rise in mortgage rates has tempered the recovery in buyer demand.

It found that enquiries have flattened to mark the end of three months of positive growth.

This cautiousness extends to near-term sales expectations which suggests a stagnant sales market in the coming months.

However, respondents remain optimistic about the long-term outlook with more agents anticipating increased activity over the next 12 months, despite political uncertainty surrounding the General Election.

A rise in new instructions

The number of properties available for sale is a bright spot, says RICS, with an increase in respondents reporting a rise in new instructions – the highest since September 2020.

This suggests sellers are becoming more comfortable listing their properties as market conditions improve post-pandemic.

Agreed sales also show a slight improvement, though the increase is modest.

RICS also says that recent financial market changes, particularly the expectation of interest rate cuts, have impacted short-term sales expectations.

Despite this, respondents remain confident in a stronger sales trend over the next year, but this will be at a slower pace than previously predicted.

‘Makings of a buyers’ market’

Sarah Coles, the head of personal finance at Hargreaves Lansdown, said: “The optimism that permeated the property market earlier this year has been crushed by the relentless rise in mortgage rates. This has all the makings of a buyers’ market – except for the fact there are so few buyers.

“The first three months of the year saw cautious buyers emerge from the woodwork. Falling mortgage rates in January persuaded them to dip their toe into the pool of properties.

“It also saw sellers flock back to the market, and for-sale signs sprang up across the country.

“However, as mortgage rates have risen steadily since, it has squeezed buyers out again, leaving these properties unviewed and unloved.”

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