Rent Expectations Continue to Surge Despite Cost-of-Living Crisis
Surveyors are cautioning that despite the ongoing cost-of-living crisis, rents are expected to keep rising steeply.
The Royal Institution of Chartered Surveyors (Rics) has reported that property professionals’ predictions of rent increases over the next few months have reached the highest levels seen in this century.
A net balance of 63% of professionals anticipate rising rental prices in the upcoming three months, setting a new record high since records began in 1999.
Strong Rental Demand and Supply Imbalance
Rics noted a substantial increase in tenant demand in the lettings market over the three months leading up to July.
However, the supply-demand imbalance in the rental sector is evident as landlord instructions further declined during the same period.
The robust demand combined with constrained supply is likely to contribute to the upward trajectory of rent prices.
Challenges in the House Sales Market
The property sales market presents a contrasting scenario.
A net balance of 45% of property professionals reported a decline in new buyer inquiries, indicating a challenging environment for prospective homebuyers.
Additionally, a net balance of 44% of professionals observed a decrease in agreed sales during July, marking the weakest reading for this measure since the initial stages of the pandemic.
Economic Factors Influencing Trends
Simon Rubinsohn, Rics chief economist, commented on the situation.
He highlighted that the recent surge in mortgage activity is anticipated to reverse in the coming months, based on feedback from the Rics Residential Survey.
Economic uncertainty, rising interest rates, and a more stringent credit environment pose challenges for potential homebuyers, reflected in the subdued new buyer inquiries metric.
Demand-Supply Imbalance Impacting Rents
The situation in the lettings market continues to draw concern. Demand remains resilient, while supply remains constrained.
This combination is expected to contribute to the continued steep rise in rents, despite the ongoing cost-of-living crisis.
Rents’ upward trajectory could exacerbate affordability challenges for renters, creating a complex environment.
Insights from a Campaign Group
Dan Wilson Craw, deputy chief executive of Generation Rent, shared insights on the situation.
He highlighted the plight of tenants who find themselves priced out of their homes, often forced into competitive lettings markets for new living arrangements.
Additionally, the rapid rise in rents on new tenancies impacts mobility, limiting the number of homes available for rent, and indirectly affecting the housing market.
Long-Term Solutions
Wilson Craw emphasized the need for long-term solutions to the housing challenges.
He stressed the importance of constructing more homes in desired locations, including social housing, as a means to alleviate the pressures of private renting and enhance housing affordability.
Impact on Mortgage Rates and Sentiment
As the Bank of England’s base rate experiences reductions, some mortgage lenders have started lowering rates.
Tom Bill, head of UK residential research at Knight Frank, noted that while sentiment remains subdued, improvements are anticipated in the latter half of the year.
However, higher mortgage rates are likely to persist, continuing to impact renters’ financial situation.
The Landscape for Non-Homeowners
A separate study conducted by property website Zoopla revealed that a significant portion of non-homeowners under 40 have relinquished hopes of homeownership in the next decade.
Economic challenges, house prices, and mortgage rates emerged as key barriers.
The study highlights the growing complexities surrounding housing aspirations for young adults.
Government Efforts and Housing Plans
A government spokesperson outlined initiatives to address housing challenges.
These include plans to build one million new homes, investment in affordable housing, and the Renters (Reform) Bill, which aims to provide tenants with more security and power against unfair rent hikes.
Various housing schemes have helped households access homeownership, although the housing landscape remains complex.
Conclusion
The steep rise in rent expectations amid the cost-of-living crisis presents challenges for both tenants and the property market.
Despite economic uncertainties, housing professionals foresee continued upward pressure on rents due to strong demand and limited supply.
The implications of this trend on affordability and mobility are evident, underscoring the need for comprehensive solutions and housing reform to address these complexities.
