In a troubling trend for tenants, the Royal Institution of Chartered Surveyors (RICS) has predicted that rents will continue to rise as the rental market becomes increasingly saturated with fewer available properties. Research conducted by RICS reveals a significant increase in rental property demand during the three months leading up to July, marking the most substantial quarterly rise since last year. However, this surge in demand has not been met with a comparable increase in rental instructions from landlords, resulting in a significant imbalance between supply and demand.
According to the RICS residential market survey, an overwhelming majority of surveyors (63%) anticipate further rent increases over the next three months. This percentage represents a fresh record high since data collection began in 1999. In fact, tenant demand already reached a five-month peak in April, reflecting a “frenzied” lettings market. With rising rents reaching an affordability “tipping point,” it is evident that the situation will not improve in the near future.
Sky News analysis reveals a pivotal transition in the UK’s housing landscape. Renters now constitute the majority, followed by those who own their homes outright and mortgage holders as the minority. This shift in housing dynamics further exacerbates the rental crisis, as demand continues to surge while the supply remains limited. Despite the ongoing cost of living crisis, RICS Chief Economist Simon Rubinsohn believes that rents will continue to rise sharply due to the persistent constraints in supply.
The RICS survey also highlighted a decline in interest among potential property buyers. In July, 44% of respondents reported a decrease in agreed sales, marking the weakest reading for this measure since the early stages of the pandemic. Instructions to sell homes also declined, despite the fact that mortgage rates have become increasingly burdensome for many individuals following the Bank of England’s rate hikes to combat inflation. As a result, an estimated 2.4 million mortgage holders will need to secure new deals by the end of 2024, as the average rate on two and five-year fixed mortgages has surpassed 6%, with no signs of decreasing.
The combination of rising rents and stagnant property sales has had adverse effects on the housing market. House prices have steadily declined as mortgage rates continue to rise and housebuilding activity slows down. The repercussions of this downturn were evident when Bellway, a prominent UK homebuilder, announced plans to cut jobs and close sites. These developments underscore the severity of the housing crisis the nation currently faces.
The rental market is experiencing a significant challenge as rents continue to rise, aggravating the already unaffordable housing conditions for many individuals. The persistently high demand is not being met with an adequate supply of rental properties, leading to an imbalance that favors landlords and further exacerbates the rental crisis. With fewer properties available for rent and an increasing number of individuals battling the cost of living crisis, the situation shows no signs of improvement in the near future. Meanwhile, potential property buyers are deterred by market conditions, resulting in declining sales and instructions to sell homes. As mortgage rates rise and house prices fall, the broader housing market is also feeling the strain of the rental crisis, prompting key players within the industry to make difficult decisions. Urgent action is required to address this growing challenge and alleviate the burden on renters across the United Kingdom.