According to a warning from surveyors, the trajectory of rising rents is likely to persist despite the ongoing cost-of-living crisis.
The Royal Institution of Chartered Surveyors (Rics) has reported that property experts hold the most robust anticipation of rent increases for the upcoming months, reaching levels unprecedented in this century.
Record High Expectations for Rental Price Growth
Rics’ findings reveal that a noteworthy net balance of 63 percent of property professionals foresee rental prices climbing over the next three months.
This statistic marks a new pinnacle in records tracing back to the second quarter of 1999, underscoring the urgency of the situation.
Strong Tenant Demand and Supply Imbalance
The lettings market has shown a pronounced uptick in tenant demand over the three months leading up to July.
However, this demand has been met with a decline in landlord instructions, indicating an ongoing mismatch between demand and supply within the rental sector.
Continued Rise in Rents Amidst Economic Challenges
Despite the prevailing cost-of-living crisis, the growing demand and constrained supply in the rental sector suggest that rents are poised to maintain a steep upward trajectory.
The imbalance between these factors remains a significant driver of this trend.
Challenges in the House Sales Market
On the front of house sales, a net balance of 45 percent of property professionals noted a decline in new buyer inquiries, indicating challenges for prospective purchasers amidst economic uncertainty and rising interest rates.
An even more concerning net balance of 44 percent reported a decrease in agreed sales during July, marking the weakest reading since the initial stages of the pandemic.
Supply Deterioration in House Sales Market
The number of new instructions for selling homes also dwindled in July, signaling a deterioration in the supply of available properties for sale.
This decline underscores the growing complexities in the housing market.
Economist’s Insights and Tenant Challenges
Rics’ Chief Economist, Simon Rubinsohn, commented on the survey’s outcomes, stating that the recent rise in mortgage activity is likely to reverse in the coming months based on the survey’s feedback.
He highlighted the persistent challenges faced by potential buyers due to economic uncertainty, increasing interest rates, and a more stringent credit environment.
Rubinsohn also pointed out the concerning state of the lettings market, with relentless demand and restricted supply driving the continued surge in rents, even amidst the cost-of-living crisis.
Response from Housing Advocates and Long-Term Solutions
Dan Wilson Craw, Deputy Chief Executive of the advocacy group Generation Rent, expressed concern over tenants being priced out of their homes and being forced into a competitive lettings market.
He stressed the necessity of building more homes, especially in desired locations, including social housing to alleviate the pressure on private renters.
Mortgage Rate Changes and Market Sentiment
Some major mortgage lenders have reduced rates as inflation shows signs of abating.
These reductions may improve market sentiment in the second half of the year.However, it’s noted that higher mortgage rates have compounded issues for renters, suggesting that the challenges faced by tenants won’t disappear in the short term.
Challenges for Aspiring Homeowners
A separate study by property website Zoopla highlighted the challenges faced by those aiming to enter the property market.
A significant portion of non-homeowners under 40 have given up on the idea of homeownership in the next decade due to factors such as the cost-of-living crisis, high house prices, and elevated mortgage rates.
Government Measures and Housing Plans
In response, a Government spokesperson outlined efforts to address the housing situation, emphasizing the commitment to building affordable, quality homes.
Initiatives such as the Renters (Reform) Bill and various housing schemes have been implemented to support both renters and potential homeowners.
However, challenges persist, and the issue of affordable housing remains a significant concern.