Tenant demand is rocketing - but landlords are leaving the PRS
Renter demand rocketed in the three months to July at a pace not seen since the beginning of last year - but letting agents say landlord instructions are in free fall.
The Royal Institution of Chartered Surveyors (RICS) residential survey of agents in July reveals that 54% had seen stronger tenant demand than they had in June.
But 30% had also seen a decline in landlords wanting to find tenants - that's up from 24% the month before.
RICS says the growing 'mismatch between rising demand and dwindling supply' means that 63% of agents are expecting rents to continue rising over the next quarter.
That figure is up from 55% previously and has now reached a high for the index.
Enquiries from new buyers for homes are down
The market survey also highlights that enquiries from new buyers for homes are down 45% - fuelled by rising mortgage rates.
Every part of the UK saw a drop in new buyer activity.
Simon Rubinsohn, RICS' chief economist, said: "The recent uptick in mortgage activity looks likely to be reversed over the coming months if the feedback to the latest RICS residential survey is anything to go by.
"The continued weak reading for the new buyer enquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment."
He added: "Just as concerning are the insights being provided around the lettings markets.
"Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis.”
Student demand for accommodation in the capital
The issue of rents rising because of a shortage of properties is also underlined with news from Foxtons - it says student demand for accommodation in the capital is also pushing prices up.
Its data indicates that rents have now risen to £597 per week on average - that's down slightly on June's £599 but still 12% higher than July 2022.
The firm says competition for a home to rent in London is intense, even in central London where the average weekly rent is now £680.
Foxtons also points to a 13% surge in applicant demand between June and July, helped by students and graduates heading to the capital.
The firm's managing director of institutional PRS, Sarah Tonkinson, said: "July's market experienced a rise in activity that always comes with peak lettings season; demand increased 13%.
"This period always sees a flurry of activity as families move to London, new graduates head for London workplaces and the student population make plans for the coming academic year.”
Worrying news for landlords
But there is also some worrying news for landlords despite the mismatch between tenant supply and demand.
And that is, according to real estate firm Hamptons, that landlords who do sell are taking a profit hit.
The firm says landlords are making £10,000 less in profit than they did last year with an average capital gain of £95,000.
And of the buy to let properties sold so far this year, the average gain has dropped by 10.1% compared with BTLs that were sold last year.
Hamptons adds that every region saw landlords making smaller gains than last year - with the biggest drop in profits being seen in the North of England.
'No doubt that tenant demand is strong and rising'
Simon Thompson, the managing director of Accommodation for Students, said: "There's no doubt that tenant demand is strong and rising – and there are fewer homes to rent.
"The RICS survey is a good indicator of what is going on and most landlords looking for new tenants will find out how strong that demand is.
"This mismatch has been growing for some time now and no one should be surprised that landlords are leaving the private rented sector (PRS)."
He added: "We are getting to the point where the government must do something to help landlords remain in the PRS or face a real issue of homelessness.
"Without private landlords, where will everyone live?"
