Pain Expected for Renters in Britain as Demand Outpaces Supply
Rents in Britain are set to continue rising as demand for rental properties increases while the supply of available properties decreases, according to the Royal Institution of Chartered Surveyors (RICS). The latest research from RICS shows a “firm” rise in demand for rental properties over the past three months, marking the strongest quarterly increase since last year. However, at the same time, instructions from landlords have decreased, creating an imbalance between supply and demand.
A majority of surveyors (63%) expect rents to continue rising in the coming three months, which is a record high since data collection began in 1999. This surge in demand comes after tenant demand reached a five-month high in April, creating a “frenzied” lettings market. With no signs of rents reducing any time soon, affordability is becoming a concern for renters.
The Housing Crisis: Supply and Affordability
The current squeeze on renters is a symptom of Britain’s housing crisis, which is characterized by a lack of supply and affordability. Analysis from Sky News reveals that renters now make up the majority in the UK, followed by people who own their homes outright and mortgage holders in the minority. The high demand for rental properties, coupled with limited supply, is expected to drive rents up sharply despite the ongoing cost of living crisis.
“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,” says Simon Rubinsohn, RICS chief economist.
Decline in Property Sales and Interest
The RICS survey also highlights a decline in interest for buying property, with 44% of respondents noting a decrease in agreed sales during July. This is the weakest reading for the sales measure since the early stages of the pandemic. Instructions to sell homes have also fallen, despite mortgage bills becoming more expensive for many due to Bank of England rate hikes aimed at reducing inflation.
According to UK Finance, the banking industry trade body, the average rate on two and five-year fixed mortgage deals has surpassed 6%. This means an estimated 2.4 million mortgage holders will need to fix a new deal by the end of 2024. As mortgage rates rise and housebuilding activity slows, house prices have been falling, leading to job cuts and site closures in the construction industry.
The housing market in Britain is facing significant challenges, with rising rents, limited supply, and declining interest in property purchases. Renters are particularly vulnerable to these challenges, as they continue to face affordability issues and a lack of available rental properties. The situation is expected to persist in the coming months, further exacerbating the housing crisis in the country.
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