The rental market is experiencing stagnation in tenant demand, while the supply of available rental properties continues to decline, according to the latest residential survey by the Royal Institution of Chartered Surveyors (RICS). The ongoing imbalance between housing availability and tenant interest is expected to drive rental prices even higher in the coming months.
Rents Expected to Rise
The report highlights that the constrained supply of rental properties, combined with flat demand, is exacerbating the housing crisis. It states: “Unsurprisingly, a net balance of 23% believe that rents will continue to rise over the next three months.”
Increase in Tenant Enquiries
Despite overall flat demand, certain market segments are seeing an uptick in activity. Adam Jennings, head of lettings at Chestertons, reported a notable surge in tenant enquiries in January, far surpassing expectations for this time of year.
“The boost in tenant demand was predominantly driven by aspiring first-time buyers who aimed to beat the looming changes to the Stamp Duty thresholds but later realized they would not meet the deadline,” Jennings explained. “Meanwhile, the number of available rental properties has not increased sufficiently to match this heightened demand, leading to more competitive market conditions for tenants in the coming weeks.”
Struggles for Renters Continue
Sarah Coles, head of personal finance at Hargreaves Lansdown, warned that the supply-demand imbalance continues to burden tenants, particularly those already financially vulnerable.
“The runaway growth of renter numbers abated slightly at the start of the year, but pressure remains, as the number of properties available fell significantly again,” Coles said. “Renters, on average, have just £62 left at the end of the month, compared to homeowners with mortgages who have £303 remaining.”
She added: “A rental hike could push millions of renters to the brink, forcing them to make difficult financial decisions. Already, 19% of renters are behind on debt repayments, compared to less than 1% of mortgage holders. Rising rents will only exacerbate these struggles.”
Housing Market Outlook Remains Steady
Despite turbulence in the rental sector, the broader housing market remains stable. The RICS survey found that buyer interest remained neutral in January, with a net balance of zero for new enquiries.
Although completed transactions saw only a slight increase, optimism remains high for future sales growth. The survey suggests a modest rise in transactions over the next three months, with expectations for a more substantial increase within the next year.
House prices continued their upward trend, with particularly strong growth in Northern Ireland and the North West. In contrast, price growth was more subdued in Yorkshire and the Humber and the South East.
Mortgage Rate Pressures and Market Stability
Tarrant Parsons, RICS’ head of market analytics, noted that growth in buyer demand slowed in early 2025, possibly due to economic uncertainty.
“The latest survey feedback indicates that buyer demand lost momentum in early 2025, likely linked to financial market turbulence in January,” Parsons said. “However, respondents remain cautiously optimistic about a slight improvement in sales activity in the near term. This outlook is supported by the recent easing of mortgage interest rate pressures.”
Tom Bill, head of UK residential research at Knight Frank, echoed this sentiment, pointing to shifting mortgage rate dynamics as a key market driver.
“Downward pressure on mortgage rates has increased slightly over the last month as inflationary concerns ahead of Donald Trump’s inauguration recede,” Bill said. “Supply remains relatively strong as sellers act following the political uncertainties of 2024 and ahead of April’s stamp duty increase.”
Bill further noted that a return to sub-4% mortgage rates would significantly bolster demand. “Much depends on how much financial flexibility the government can find and how the UK navigates escalating global trade tensions,” he said.
As the rental sector grapples with dwindling supply and mounting affordability concerns, market observers will be watching closely for policy interventions or economic shifts that could ease the pressure on tenants and buyers alike.