Market Analysis

Renters are under more strain as the UK property market grows, according to RICS

Amos Simanungkalit · 10 Oct 202421.5K Views

Britain's housing market saw further recovery last month, according to property surveyors who reported increases in house prices, sales, and enquiries. However, the rental market faced mounting pressure as demand from tenants continued to outstrip the supply of available rental homes.

On Wednesday, the Royal Institution of Chartered Surveyors (RICS) revealed that its main house price balance, which tracks the difference between surveyors reporting price increases and decreases, turned positive for the first time since October 2022. The house price balance rose to +11 in September, up from a revised zero in August, and exceeded the +4 predicted by economists in a Reuters poll. A net balance of +54 surveyors expected house prices to rise over the next year, marking the strongest outlook since April 2022.

Additionally, the measure of expected sales for the coming 12 months jumped to a net balance of +45, compared to just +3 a year earlier.

Tarrant Parsons, RICS' head of market analytics, attributed the rebound in buyer demand to the reduction in borrowing costs in August. He noted, "A further unwinding of monetary policy is expected in the coming months, which should create a more favourable environment for the market moving forward."

The Bank of England's base rate is currently 5%, following the first reduction in borrowing costs in four years in August. Last month, the BoE held rates steady, but investors on Wednesday placed an 83% chance of a quarter-point cut at the bank’s November 7 meeting.

Other indicators of Britain’s housing market also show signs of recovery, supported by expectations of another interest rate cut. Mortgage lender Halifax reported on Monday that house prices rose in September at the fastest annual rate since late 2022.

RICS also noted that some homeowners, anticipating a possible rise in capital gains tax in the upcoming Labour government's first budget later this month, were rushing to list their properties. This has further constrained the supply of homes available to renters.

Meanwhile, tenant demand in the lettings market continued to rise, and rents are expected to increase in the months ahead. Finance Minister Rachel Reeves has indicated that some taxes may need to be raised in her first budget on October 30.