UK renters hit by housing supply squeeze

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A dwindling number of properties coming to the rental market combined with rising demand is expected to push up prices for tenants already squeezed by record increases, according to a closely watched survey.

Landlord instructions, which indicate landlords putting properties up for rent, fell to a net balance of minus 29 per cent in the three months to October, according to the Royal Institution of Chartered Surveyors.

The figure was down from minus 17 in the previous quarter and the weakest reading since 2021.

The index tracks the difference between surveyors reporting an expansion and falls in landlords making their property available for rent.

Tina Paillet, Rics president, said the data indicated that “renters are feeling the pressure from a limited supply of rental properties and rising rents”.

The Rics index data, released on Thursday, showed that tenant demand was 19 per cent, continuing the strong set of readings seen for most of the past three years.

The mismatch between supply and demand in the market led to a net balance of 33 per cent of surveyors expecting rental prices to rise over the next quarter, indicating strong price growth.

She added that the immediate increase in stamp duty for landlords acquiring rental properties, announced in the Budget, may increase supply for home buyers.

But the policy would also “make it more challenging to address the critical shortage of rental homes”, she said.

Annual rent growth peaked at 9.2 per cent in March, the highest pace since records began in 2015. It marginally eased to 8.4 per cent in September, according to separate official figures published last month.

Rental price growth has been fuelled by increased demand as more households turned to the rental market against a background of increasingly costly mortgages.

At the same time, landlords are facing higher interest rates and costs, squeezing their profits.

While mortgage rates have come down from their peak last summer, supporting a recovery in the property market, renters are still under pressure.

Rent on new tenancies cost 30 per cent of renters’ gross income in September — the highest since data began in 2017 — according to figures from property data company PriceHubble published by the Office for National Statistics in October. 

Neil Foster, partner at property agency Hadrian Property Partners, said: “Rental stock continues to dwindle, applying further upward pressure to rent levels.

“Quite where the ‘ivory tower’ dwellers in Westminster expect most private tenants to live is a mystery!” he added.

The Rics survey also reported that house prices continued to rise, with the corresponding index reporting a net balance of 16 per cent in October — up from 11 per cent in September and zero in August.

House price growth was supported by expanding new buyer enquiries, with the relative measure showing a net balance of 12 per cent in October, indicating the fourth consecutive month of expansion.