Recent data from the Royal Institution of Chartered Surveyors (RICS) highlights a tightening lettings market in the UK, with tenant demand rising amid a continued decline in landlord property supply. This dynamic is exerting upward pressure on rents, presenting challenges for both landlords and tenants as the market adjusts to evolving economic conditions and regulatory changes.
Rising Tenant Demand Meets Falling Landlord Supply
The latest RICS UK Residential Market Survey for May reveals a notable increase in tenant demand, with a net balance of +14%, signalling stronger interest from renters seeking accommodation. Conversely, landlord instructions to let properties remain significantly negative at -28%, indicating fewer landlords are placing homes on the market. This imbalance between demand and supply is contributing to heightened rent expectations, which have risen to a net +36%, the highest level recorded since May of the previous year.
Such trends suggest that landlords are becoming more cautious about entering or remaining in the rental market, possibly influenced by regulatory pressures and economic uncertainties. For tenants, this means increased competition for fewer available properties and potential rent rises, while letting agents and property managers may face challenges in meeting client needs within a constrained supply environment.
House Prices and Sales Market Show Continued Weakness
Alongside lettings market shifts, house prices have continued to decline, with a net balance of -35% reported for the second consecutive month. Regional variations are evident, with the South East and East Anglia experiencing stronger downward price pressures, whereas Northern Ireland continues to see modest price growth. Near-term sales expectations have improved slightly but remain negative at -25%, while longer-term sales forecasts have moved into neutral territory at +2% over the next 12 months.
The sales market remains subdued, with new buyer enquiries holding steady at a net -34% and agreed sales at -37%, reflecting ongoing caution among purchasers. Additionally, average completion times have extended to 21.5 weeks, marking the longest duration since RICS began collecting this data in 2017. These factors collectively point to a sluggish sales environment, which may indirectly influence landlord decisions regarding property investment and lettings.
Market Activity Shows Signs of Stabilisation but Remains Fragile
RICS’ head of market research, Tarrant Parsons, notes that some key indicators suggest the recent downturn in market activity may be stabilising, with figures broadly steady rather than continuing to deteriorate. However, he cautions that these indicators remain in negative territory, so it would be premature to interpret this as a recovery. Inflationary pressures, particularly from rising energy costs, continue to pose risks, and the Bank of England has indicated that further interest rate increases cannot be ruled out.
In this context, market sentiment is expected to remain fragile until there is greater clarity on economic conditions and policy direction. Landlords and agents should therefore prepare for ongoing uncertainty, which may impact rental demand, pricing, and investment decisions in the near term.
Impact of Regulatory and Fiscal Measures on the Rental Market
Industry experts highlight the influence of recent government interventions on landlord behaviour and market supply. Tom Bill, head of UK residential research at Knight Frank, points to the Renters’ Rights Act as a factor contributing to tighter supply, as some landlords choose to exit the market rather than comply with new requirements. Anticipated stricter regulations around energy performance certificates may further encourage landlords to sell properties, exacerbating supply constraints and pushing rents higher.
Tomer Aboody, director of specialist lender MT Finance, emphasises the effect of fiscal measures such as increased stamp duty for second home purchases, which may dampen investor confidence and reduce the number of properties available to rent. He warns that policies perceived as punitive towards landlords risk unintended consequences, including rent increases and reduced housing options for tenants. This underscores the need for balanced approaches that consider the interests of all market participants.
What this means for landlords
Landlords should be aware that the current market conditions may lead to increased demand for rental properties alongside reduced supply, potentially allowing for rent increases but also requiring careful management of tenant relationships and compliance obligations. The pressures from regulatory changes, including the Renters’ Rights Act and forthcoming energy efficiency standards, mean landlords may need to review their portfolios and consider the costs and benefits of continuing to let properties under evolving rules.
Letting agents and property managers should prepare for a competitive lettings market where securing quality tenants may become more challenging, and rental pricing strategies will need to reflect both market demand and affordability considerations. Staying informed about legislative developments and economic trends will be essential to advising clients effectively and maintaining compliance.
What TLA members should consider
- Review current rental property portfolios to assess compliance with the Renters’ Rights Act and upcoming energy performance requirements.
- Monitor local market conditions closely to set competitive yet fair rent levels that reflect supply and demand dynamics.
- Engage proactively with tenants to manage expectations around rent changes and tenancy terms.
- Consider the financial implications of potential further interest rate rises on mortgage costs and rental yields.
- Stay updated with RICS and other market reports to anticipate shifts in sales and lettings activity.
- Utilise TLA resources and training to ensure compliance and effective property management under changing regulations.
TLA Training Academy
The Landlord Association provides structured guidance, compliance education and practical support for landlords, letting agents and property professionals. Members can access training and resources designed to help them stay organised, informed and prepared.
Landlords can explore the Academy here: https://landlordassociation.org.uk/tla-academy/
Those looking to join and access member support can register here: https://landlordassociation.org.uk/get-started-with-the-landlord-association/
TLA update
The Landlord Association is continuing to expand its support, resources and partner network for landlords, tenants, agents and property professionals across the UK. Service providers interested in working with TLA can register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/
Source: www.property118.com
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