UK Rental Market Faces Growing Challenges
Britain's rental market is grappling with "growing challenges" as rising demand and low supply create more difficulties for tenants, according to a closely monitored survey. The Royal Institution of Chartered Surveyors (RICS) reported on Thursday that its measure of tenant demand surged to 35 in May from 10 in April, while new landlord instructions, indicating properties available for rent, remained flat.
The RICS monthly survey measures the difference between the percentage of UK surveyors reporting increases and decreases in rental demand and instructions. The widening gap between supply and demand suggests that "rental prices will continue to rise for the foreseeable future, albeit at a slower pace than previously," RICS stated. "The UK’s lettings market is facing growing challenges, and it will be interesting to see how the political parties address this."
Recent official data revealed that rental prices increased at an annual rate of 8.9% in April, down slightly from the record high of 9.2% in March.
This survey coincides with both the Conservative and Labour parties outlining measures to promote home ownership ahead of the July 4 election. The Conservatives, trailing Labour by about 20 points in opinion polls, have promised to abolish stamp duty for first-time buyers on homes valued under £425,000. Meanwhile, Labour has proposed a government mortgage guarantee scheme called "freedom to buy."
Rising demand and low supply hit ‘Generation Rent’ amid election focus on home ownership.
RICS chief executive highlighted that while both parties claim to support home ownership, improving conditions for renters must also be prioritized. Rising rents, driven by high demand and limited supply, have been particularly pronounced in London. Some landlords have exited the market due to increased regulations and higher borrowing costs, which they have sometimes passed on to tenants.
A Birmingham surveyor noted, "Rental supply isn’t growing, perpetuating the ‘perfect storm’ for rental prices: increased demand, reduced supply, and the need for landlords to cover their increased costs”, a report from the Financial Times revealed.
The survey also showed a decline in new buyer demand, which fell to minus 8 in May, the lowest level since November 2023, attributed to waning confidence in an imminent interest rate cut. Additionally, there was a reported decrease in the number of sales agreed in May, with the RICS house price measure dropping to minus 17 from minus 7 in April.
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