UK rents squeezed higher as drop in homebuyer demand continues

New house demand fell for the 11th month in a row in March, a survey by the Royal Institution of Chartered Surveyors found

Homebuyer demand is down but it's not all bad news, say property professionals. PA

A "frenzied" UK lettings market that is squeezing prices higher is being driven by fierce competition for rented properties, while housing sales remain downbeat, research by surveyors has found.

The Royal Institution of Chartered Surveyors said tenant demand reached a five-month high with strong demand across the country.

A decreasing number of new landlords has led to a demand and supply imbalance that means rents could be pushed higher.

The proportion of surveyors who said they expected rents to rise in the next three months jumped to 59 per cent, up from 45 per cent in the previous month’s survey, and nearing the highs seen towards the start of last year.

All parts of the UK are set to see an increase in rent prices in the year ahead, professionals said.

The research is a monthly sentiment survey by the institute of chartered surveyors who operate in the UK’s residential sales and lettings markets.

It also collects the opinions of property professionals.

“Frenzied is possibly the ideal word to sum up the rental market," said one in Hexham, Northumberland.

"Fierce competition for too few houses; a direct consequence of years of ill-judged government policy in the private rented sector.”

Another, in Yorkshire and the Humber, said: “Some of our buy-to-let landlords are considering exiting the market.

"Tenant demand is strong, so it suggests that increased costs, taxes, and administration burden is taking its toll.”

Meanwhile, new house buyer demand fell for the 11th month in a row in March, the institute found.

While surveyors still expect sales to remain under pressure in the next few months, they were less downcast than in February amid expectations of interest rate rises coming to an end.

It also marked the first time in more than a year that the proportion of surveyors expecting sales to pick up in the next 12 months was positive.

And the proportion of professionals who noted a decline in house prices slowed for the first time in 10 months.

Simon Rubinsohn, the institute's chief economist, said that the overall tone of feedback from surveyors was “still one of caution” over the sales market.

“Deals are being done, but a theme coming through in the anecdotal remarks is the need for vendors to recognise the shift in market dynamics," Mr Rubinsohn said.

“Significantly, there is also a sense that the medium-term outlook is looking a little more settled, helped by the perception that the interest rate cycle may be near the peak.”

One professional, in Yorkshire and the Humber, said the market remained “sluggish” and “many buyers are sitting on their hands simply watching the market".

Another said sales had started picking up after mortgage rates had not risen as high as was predicted last year.

“Things may not be as grim as we’d feared six months ago, but buyer demand has been dropping for the best part of a year," said Sarah Coles, head of personal finance at Hargreaves Lansdown.

"So if you’re going to sell, you need to enter the market with clear-eyed pragmatism.

“Agents stress that with buyers thin on the ground and sales sluggish, only the right properties at the right price are shifting.”