Tenant demand in the UK rental market continues to rise amid a falling supply of available homes, according to the latest findings from the Royal Institution of Chartered Surveyors (RICS). This trend is placing further upward pressure on rents at a time when the housing sales market is also showing signs of weakness.
Rising Tenant Demand and Falling Supply
The RICS UK Residential Survey reveals that tenant demand increased to a net balance of +14%, while landlord instructions to let properties remained negative at -17%. This imbalance between demand and supply is contributing to expectations of rising rents, with a net balance of +25% of survey respondents forecasting rental increases in the coming months.
These developments are likely to intensify financial pressures on tenants, especially as the sales market faces its own challenges.
Weakness in the Sales Market
Homebuyer demand remains subdued, with new buyer enquiries at -34% in April, a slight improvement from -40% in March but still indicative of low activity. Similarly, agreed sales were broadly unchanged, with a net balance of -36% compared to -35% the previous month.
House prices are experiencing increased downward pressure, with the headline house price indicator dropping to -34% in April from -25% in March. This reflects a market under strain, influenced by broader economic factors.
Subdued Buying Sentiment
Tarrant Parsons, head of market research at RICS, commented: “April’s results show a housing market still in the grip of macro headwinds stemming from the Middle East conflict.” He highlighted that recent Bank of England warnings about potential interest rate rises to combat inflation—driven by higher oil prices and disrupted supply chains—are creating a challenging environment for buyers.
Parsons added, “Until there is a clearer path for inflation and borrowing costs, activity and sentiment look set to remain subdued, particularly across southern England and London where affordability pressures are most acute.”
Regional Variations in House Prices
House prices in London, the South East, East Anglia, and the South West have faced stronger downward pressure. In contrast, the North West and the North of England posted marginally positive readings, while prices continued to rise in Scotland and Northern Ireland.
Near-term house price expectations remain negative at -38%, although this marks an improvement from March’s -45% reading.
Industry Perspectives on Market Trends
Tom Bill, head of UK residential research at Knight Frank, noted that the Renters’ Rights Act has exacerbated the imbalance between supply and demand in the rental market, sustaining upward pressure on rents. He warned that future green regulations for landlords, if introduced without effective consultation, could further restrict supply and intensify rent increases.
Bill also pointed to the impact of rising mortgage costs linked to the Middle East conflict and energy price shocks. He observed that the prospect of a new government to the left of Keir Starmer introduces additional inflationary concerns, further squeezing buyers. “Those sitting on mortgage offers that predate the conflict are keen to transact, but downwards pressure on prices will increase as offers lapse in coming months,” he said. Bill expects minimal UK house price growth of 1.5% this year, contingent on developments in the Middle East and Westminster.
Jeremy Leaf, a north London estate agent and former RICS residential chairman, remarked that while the Renters’ Rights Act has prompted some landlords to sell, the number is not as high as feared. The resulting shortage supports rents, which might otherwise have dipped given tenant affordability concerns. He added that demand has improved slightly in recent weeks, but the rising cost of living—partly due to the war in Iran—is frequently cited as a reason tenants are cautious about increasing rental offers.
What this means for landlords
Landlords should be aware that tenant demand remains strong despite supply constraints, which is likely to sustain rental growth in the near term. However, affordability pressures on tenants mean that rent increases may be tempered by market realities.
With sales market activity subdued and house prices under pressure, landlords may find fewer buyers in the market, potentially influencing decisions around portfolio management and investment strategies. Additionally, forthcoming regulatory changes, particularly related to environmental standards, could further impact rental supply and costs.
Source: Based on reporting from Property118
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Source: www.property118.com
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