Tenant demand is picking up while fewer landlords are bringing properties to the rental market, prompting fresh expectations of rent rises, according to the latest industry research.

RICS’s residential market survey found tenant demand returned to modest growth last month, with the net balance rising to +7% from -1% previously. However, new landlord instructions dropped, with a net balance of -30%, creating a mismatch between the number of prospective tenants and available properties.

Against this backdrop, rental growth expectations strengthened, with the three-month outlook reaching +41%, its highest reading since early 2024.

London-based agent Jeremy Leaf says demand continues with fewer available properties - partly due to landlords’ adverse reaction to the Renters’ Rights Act causing upward pressure on rents, and some lowering of standards. He adds: “Inflation worries remain, so the market is price-sensitive and only correctly priced properties are being snapped up.”

Activity

Research from letting agency Chestertons also points to improving tenant activity. It reports that new tenant registrations increased by 4.1% year-on-year in October, ahead of the 3.6% average rise for the year to date, while the number of landlords reducing their initial asking rents fell by 13%, suggesting that landlords are under less pressure to reduce their asking rents, reflecting sustained tenant demand.

Head of lettings Katinka Hill (pictured) says it’s encouraging news for buy-to-let landlords. “Rising rents and improving yields are creating opportunities for investors, although choosing the right property and setting a realistic asking rent remain essential to securing reliable tenants and minimising void periods.”

The findings come as landlords consider how to respond to higher property income tax rates due to take effect in April 2027.

Survey

A survey of 650 UK landlords by LegalforLandlords found that 70% were considering increasing rents following the tax changes; while 32% said they would raise rents specifically to offset the additional 4% tax burden, a further 38% were considering increases. Just 22% said they would absorb the cost themselves, while 8% believed their local market would not support further increases.

The findings echo a post-Budget survey of 168 NRLA members by Pegasus Insight, which found 73% expected the tax changes to lead to higher rents when they were next permitted to increase them. More than half were also considering selling properties or reducing their portfolios.

Meanwhile, UK Finance figures suggest that buy-to-let mortgage arrears remain relatively low. There were 8,170 buy-to-let mortgages in arrears in the third quarter of 2026, down 22% year-on-year and equivalent to 0.43% of all buy-to-let mortgages.

Buy-to-let possessions increased 10% on the previous quarter to 690 but remained 23% lower than a year earlier.

‍