RICS: Landlord instructions in short supply as market slows

The latest RICS UK Residential Survey results suggests that tenant demand continues to lose momentum. 

Alongside this, landlord instructions remain in short supply, recording a net balance of -13 (-18 last month), pointing to a weakened picture.

Moving forward, RICS says that on the basis of surveyor feedback for its survey, rents are still expected to rise by a net balance of +33, although this marks a three-year low for the near-term rental growth expectations indicator.

RICS is a sentiment survey, measuring trends through the net balance of opinion amongst those surveyors polled.

On the sales side, the recent recovery in buyer demand has mellowed slightly, with the market impacted by rising mortgage rates once again. 

However, the general sentiment from respondents continues to point to a stronger picture for overall sales market activity over the next 12 months.

The headline for new buyer enquiries, in terms of net balance, dropped from +6 to -1 in April, marking the end of three consecutive positive monthly results, indicating a more stagnant market this time round. The regional feedback on buyer demand is mixed, with a notable loss of momentum mainly seen in London and Southern parts of England.

Looking at the number of properties available on the market, a net balance of +23 of respondents noted an increase in new instructions during April. 

RICS says this represents the most positive figure since September 2020, as sellers are likely to be feeling more comfortable in listing their properties as current market conditions continue to improve following the pandemic.

The agreed sales indicator also improved slightly in April, with a net balance reading of +5 compared to -5 last month. Although this marks the most positive reading since May 2021, it only shows a minimal increase in monthly sales.

Recent changes in financial markets, especially the reduction in expectations regarding how much the Bank of England might loosen monetary policies this year, have affected short-term sales expectations negatively. The net balance for sales expectations over the next three months dropped to -1, the lowest since October 2023 which suggests a stagnant near-term outlook.

However, respondents are still optimistic about a stronger trend in sales activity over the next twelve months, although they expect it to be slightly less robust with a net balance of +33 recorded this time, down from +46 last month.

Simon Rubinsohn, RICS’ chief economist, comments: “The survey demonstrates the sensitivity of the sales market to interest rates at the present time, given the continuing challenge around affordability. A modest back up in mortgage pricing has contributed to the flatlining in the buyer enquiries metric over the past month, as well as the slightly more cautious signals around near-term expectations.

“That said, there is still a strong perception that activity in the market will pick up in the latter part of the year and into 2025, irrespective of any political uncertainty around the general election.

“As far as the lettings market is concerned, an increasing number of respondents are also drawing attention to affordability constraints, and this is reflected in a more modest pace of rental growth. But a fundamental problem in the market across much of the country remains the imbalance between demand and supply with new instructions continuing to decline”.