More tenants are chasing fewer homes as landlord instructions remain scarce, piling further pressure on an already squeezed UK rental market.

The Royal Institution of Chartered Surveyors’ (RICS) latest residential survey reveals that a net balance of +23% of letting agents saw an increase in tenant demand during September - the third consecutive month of growth.

Alongside this, the flow of landlord instructions remained subdued. Looking ahead, a net balance of +37% of agents expects rents to rise during the next three months. Although this is lower than the +44% recorded in August, RICS says it’s comfortably above the +27% average seen during the first half of the year.

Agents are also pointing to an imbalance between landlords’ costs and tenants’ budgets. David Boyden, at Boydens in Colchester, says rental supply remains tight across Essex and Suffolk, supporting rents, but that landlords need to be mindful of what tenants can realistically afford.

Attractive

“Tenants are finding no difficulty in securing attractive deals but costs across the board are increasing resulting in an increased gulf between renewal costs for tenants and new letting costs,” says Alex Shinder, at Nw3Homes in London. “Affordability ceilings continue and so a smaller pool of tenants can afford them.”

John Chappell at Chappell & Co Surveyors in Skegness, adds that with falling supply and increasing demand, it’s an inevitable result of politicians “listening to us but not hearing us”. He says: “Landlords are instructing to factor in the £65 annual registration fees to rents as well. This is an unintended consequence of recent policy.”

With a net balance of +37% expecting rents to rise over the next three months, tenants looking for an affordable rental property could face fierce competition, according to Rachel Springall, finance expert at Moneyfactscompare.co.uk.

Future

“Those who plan to buy their own home in the future may put their plans on hold and remain in the private rental sector for longer as mortgage rates remain high, adding further pressure to tenant demand,” predicts Springall.

She says attention will now turn to the October Budget and the government’s new Your First Home scheme, which could provide some welcome support for prospective first-time buyers. However, it comes at a challenging time for a fragile housing market, with weak buyer demand, higher mortgage rates and stretched affordability weighing on activity.

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