Fierce competition for rented properties is squeezing prices higher, while house sales remain sluggish, research by surveyors has found.
Tenant demand reached a five-month high amid a “frenzied” lettings market, the Royal Institution of Chartered Surveyors (Rics) said.
But the number of new properties available has declined, leading to a supply and demand imbalance that could see rents pushed even higher.
The proportion of surveyors who said they expect rents to rise in the next three months jumped to 59%, up from 45% in the previous month’s survey, and nearing the highs seen toward 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.
One property professional, based in Hexham, said: “Frenzied is possibly the ideal word to sum up the rental market. Fierce competition for too few houses; a direct consequence of years of ill-judged government policy in the private rented sector.”
Another, based 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 admin burden is taking its toll.”
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Falling demand for houses
It comes as new house buyer demand fell for the 11th month in a row in March.
One professional, based in Yorkshire and the Humber, said the market remains “sluggish” and “many buyers are sitting on their hands simply watching the market”.
Another said sales have started to pick up after mortgage rates had not risen as high as predicted last year.
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Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “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, so if you’re going to sell, you need to enter the market with clear-eyed pragmatism.”
Simon Rubinsohn, Rics’s chief economist, said the overall tone of feedback from surveyors was “still one of caution” over the sales market.
He said: “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.”
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Mr Rubinsohn added: “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.”
