The most recent findings from the RICS UK Residential Survey indicate a notable slowdown in tenant demand, coupled with a persisting shortage of landlord instructions. According to the report, tenant demand has lost momentum, while landlord instructions remain in short supply, registering a net balance of -13, compared to -18 in the previous month, painting a weakened outlook.
Despite these challenges, RICS asserts that rents are anticipated to climb, albeit at a slower pace, with a net balance of +33. This figure, however, marks a three-year low for the near-term rental growth expectations indicator. RICS conducts a sentiment survey, gauging trends through the net balance of opinion among surveyed professionals.
On the sales front, while there had been a recent rebound in buyer demand, it has somewhat softened, influenced by a resurgence in mortgage rates. Nonetheless, respondents express optimism regarding overall sales market activity over the next year.
In April, the headline for new buyer enquiries witnessed a decline from +6 to -1, signalling a shift from three consecutive months of positive results, indicative of a more stagnant market. Regional feedback on buyer demand varies, with notable momentum loss observed primarily in London and Southern England.
Regarding property availability, a net balance of +23 respondents noted an uptick in new instructions in April, the most positive figure since September 2020. RICS attributes this to sellers feeling more confident in listing properties as market conditions improve post-pandemic.
Although the agreed sales indicator saw a slight improvement in April, with a net balance reading of +5 compared to -5 the previous month, indicating a minimal increase in monthly sales, short-term sales expectations have been dampened by recent shifts in financial markets.
Respondents anticipate a less robust trend in sales activity over the next twelve months, with a net balance of +33, down from +46 the previous month. Simon Rubinsohn, RICS’ chief economist, notes the market’s sensitivity to interest rates and affordability challenges, contributing to cautious signals around near-term expectations.
Rubinsohn further emphasizes the expectation for a resurgence in market activity towards the latter part of the year and into 2025, despite political uncertainties surrounding the general election. Additionally, affordability constraints are increasingly affecting the lettings market, reflected in a more modest pace of rental growth. The fundamental imbalance between demand and supply persists across much of the country, with new instructions continuing to decline, Rubinsohn concludes.