Rents expected to rise further amid strong tenant demand
The Royal Institution of Chartered Surveyors (RICS) reports that UK rents are set to increase further due to rising tenant demand and constrained supply, with forecasts indicating an average 3% rise over the next year.
The latest RICS market snapshot highlights ongoing upward pressure on rents as tenant demand continues to grow while landlord instructions decline. The net balance of respondents expecting rents to rise over the next three months increased to +44%, up from +33% in July. Over the next twelve months, rents are anticipated to increase by around 3% on average across the UK.
This trend comes despite some tentative signs of improvement in the sales market, where buyer demand and agreed sales are recovering from recent lows but remain negative overall. Interest rate uncertainty and potential changes to property taxation ahead of the October Budget continue to weigh on market confidence, according to RICS.
RICS market snapshot details rental and sales trends
RICS’s monthly survey of its agent members shows tenant demand rising steadily, with a net balance of +18%, while landlord instructions remain negative at -14%. This imbalance between strong demand and limited supply is a key driver behind the expected rent increases.
In the sales market, new buyer enquiries and agreed sales have improved but remain below neutral levels. The net balance for new buyer enquiries rose to -19%, the best reading since January, and agreed sales improved to -17%, the least negative since February. Expectations for sales volumes over the next year have also increased slightly, with a net balance of +6% anticipating higher sales volumes, up from +3% previously.
House prices continue to face downward pressure overall, though the rate of decline has moderated. The headline price net balance edged up slightly to -28% in August from -29% in July. Regional differences persist, with London’s price outlook more negative than the national average, while Northern Ireland and the North West of England show some price growth.
Context of rental market pressures and regulatory environment
The rental sector has been under sustained pressure from supply shortages and affordability challenges for several years. The current RICS data confirms that these pressures remain acute, with landlords less willing or able to bring new properties to market, tightening supply further. This dynamic continues to push rents higher, exacerbating affordability issues for tenants.
At the same time, recent legislative changes such as the Renters’ Rights Act have altered the balance of power between landlords and tenants, with some landlords reportedly reducing their portfolios or exiting the market. This may contribute to the constrained supply environment that RICS identifies.
Interest rate volatility and uncertainty over future tax policies add further complexity for landlords and letting agents. The prospect of increased borrowing costs and potential changes to property taxation in the upcoming Budget could influence landlord investment decisions and market activity in the short term.
Practical implications for landlords and letting agents
For landlords managing small portfolios, the RICS outlook suggests that rents are likely to rise modestly but steadily over the coming year. This may provide some relief on income streams but also requires careful consideration of tenant affordability and market conditions to avoid increased voids or arrears.
Letting agents should prepare for continued high tenant demand and limited new landlord instructions. This environment may increase competition for available properties, requiring clear communication with landlords about realistic rent expectations and compliance with legal obligations.
Monitoring regional variations will be important, as rent and price trends differ significantly across the UK. London’s more negative price outlook contrasts with modest growth in Northern Ireland and the North West, affecting local letting strategies and pricing.
Uncertainties and what landlords should watch
While RICS forecasts a 3% average rent increase over the next year, this is subject to change based on economic factors such as interest rates, inflation, and government policy. The October Budget may introduce new tax measures affecting landlords, which could alter investment incentives and market behaviour.
Additionally, the ongoing impact of the Renters’ Rights Act and any future regulatory changes remain uncertain. Landlords should stay informed about legal developments and government guidance to ensure compliance and adapt to evolving tenant rights.
Supply constraints may ease if more landlords re-enter the market or new housing supply improves, which could moderate rent increases. Conversely, further reductions in landlord numbers or tighter lending conditions could intensify upward pressure on rents.
Considerations for landlords amid rising rents and regulatory changes
- Review rent levels regularly to reflect market conditions and tenant affordability, balancing income goals with tenancy sustainability.
- Maintain up-to-date knowledge of legal obligations under recent tenancy legislation and prepare for potential changes following the October Budget.
- Monitor local market trends closely, as regional differences are significant and affect rental demand and pricing.
- Keep thorough records of property management activities, communications, and compliance to support tenancy agreements and dispute resolution.
- Engage with letting agents who understand the current market dynamics and regulatory environment to optimise letting strategies.
Supporting landlords through market challenges with TLA resources
Membership of The Landlord Association (TLA) offers landlords and letting agents access to tailored compliance resources and practical guidance to manage rental properties effectively amid changing market conditions. TLA’s developing ORBIT platform, currently in BETA testing, aims to assist members by organising property portfolios, managing rental documentation, and recording key compliance actions.
ORBIT’s tools for maintaining records of inspections, repairs, and communications can help landlords demonstrate adherence to safety and tenancy obligations, which is increasingly important as regulatory scrutiny intensifies. Members can also access up-to-date information on tenancy law and regulatory developments, supporting informed decision-making in a shifting market.
Exploring TLA membership provides landlords with practical support to navigate rent setting, compliance, and tenant management challenges in a market where rents are rising but uncertainties remain.
Looking ahead, landlords should keep abreast of government announcements and market data to adjust strategies promptly. Staying informed and organised will be key to managing portfolios successfully in a period of continued rental growth and regulatory change.
Sources: Letting Agent Today
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