Demand for rental homes pushes upwards as house sales market slows

Demand for homes in the rental sector is continuing to rise as home buyer activity drops off, according to surveyors.

This is contributing to an upward pressure on rental prices, at a time when house prices have been falling month-on-month, the findings from the Royal Institution of Chartered Surveyors (Rics) indicate.

A net balance of 35% of property professionals saw a pick-up in rental demand in November, while a balance of 27% reported a decline in landlord instructions.

The mismatch between demand and supply continues to drive rents higher, with a net balance of 43% of contributors anticipating rental prices moving higher over the coming three months.

Looking at the house sales market, a net balance of 38% property professionals reported a fall in demand from house hunters.

House sales were also down, with a balance of 35% of professionals reporting a decrease.

An overall balance of 25% survey participants observed house prices falling rather than rising.

Prices were said to be retreating across most parts of the UK, according to Rics, with the latest feedback especially downcast in the south sast and south west of England.

For now, prices continue to edge higher in Scotland and Northern Ireland, but the pace of growth is significantly subdued compared with earlier in the year, the report said.

Over the next 12 months, an aggregate net balance of 61% of property professionals surveyed expect to see further declines in house prices rather than increases.

Simon Rubinsohn, chief economist at Rics, said: “The imbalance in the rental market remains significant as landlord instructions continue to fall and is consistent with further increases in rents, even if the momentum does appear to be slowing just a little.”

The Rics report also quoted the views of property professionals.

One, based in the West Midlands, said: “Definitely signs that the troubles in the economy are now impacting sales in the housing market.

“Many more chains are breaking, everything is taking longer to sell and prices are starting to fall. More challenging times lie ahead.”

Another, based in Northern Ireland, said: “Many buyers are adopting a ‘wait and see approach’.

“Now the autumn statement is out of the way, we should see normality return, albeit after the Christmas period is over.”

An Edinburgh-based estate agent added: “Despite the economic situation, we have also seen very few fall throughs in agreed sales over the last
three months.”