RICS: Tenant supply and demand becoming more squeezed

Tenant demand is rising while supply is falling, which means rents are likely to increase in the months ahead, the RICS Residential Survey found.

A net +11 of surveyors said tenant demand is rising, however supply has fallen according a net -21. As a result, a net +39 reckon rents will increase in the coming months.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said:

“The government has been promising new rights for renters, but there’s no light at the end of the tunnel when it comes to the availability of properties or runaway rents.

“Tenant numbers may be rising more slowly, but they’re still climbing at a time when landlords continue to flee the market.

“Some of the agents are now reporting a surge in landlords selling up because they’re worried about potential changes to capital gains tax in the forthcoming Budget – which could simultaneously push ruinous rents up even higher and keep a lid on property prices in the sales market.”

The news comes amidst the introduction of the Renters Rights’ Bill this week, which could drive landlords out of the market due to the heightened tenant protections and Section 21 ban.

Tom Bill, head of UK residential research at Knight Frank, said:

“The mismatch between supply and demand could grow if landlords believe new government legislation for renters is too punitive.

“Protection for tenants is a positive thing but if the legislation is not balanced and more landlords decide to sell, falling supply and rising rents would be an unwelcome consequence for renters.”

In terms of the sales market, a net +15 of RICS respondents noticed a rise of people looking to buy homes. As a result, +14 expect prices to increase in the next three months.

Simon Rubinsohn, chief economist of RICS, said:

“The… survey captures an improvement in sentiment over the past month in the wake of the modest decline in mortgage rates with buyer interest improving, albeit from a relatively low base, and stock levels edging up.

“However, anecdotal remarks from respondents still demonstrate the need for realistic pricing to get deals done with uncertainty both around the scope for further interest rate cuts and the likely contents of the forthcoming Budget keeping the mood in check.

“Affordability remains an issue in the sales market even with somewhat cheaper finance now available but the picture appears even more acute in the lettings market where the amount of rental stock continues to diminish.

“Contributors continue to point to landlords looking to scale back their portfolios which will inevitably increase the imbalance that already exists in the market.”

Kindly shared by Property Wire