Fierce competition for rented properties is squeezing prices higher in a “frenzied” lettings market, while housing sales remain downbeat, research by surveyors has found.
Tenant demand reached a five-month high with strong demand seen across the country, the Royal Institution of Chartered Surveyors (Rics) said.
But the degree of new landlords to instruct properties declined, leading to a demand and supply imbalance that means rents could be pushed higher.
The proportion of surveyors who said they expect rents to rise in the next three months jumped to 59%, up from 45% in the previous month’s survey, and nearing the highs seen toward the start of last year.
The research is a monthly sentiment survey, by Rics, of chartered surveyors who operate in the UK’s residential sales and lettings markets.
It also collects the views of property professionals alongside the survey.
One, based in Hexham, said: “Frenzied is possibly the ideal word to sum up the rental market. Fierce competition for too few houses; a direct consequence of years of ill-judged government policy in the private rented sector.”
Another, based in Yorkshire and the Humber, said: “Some of our buy-to-let landlords are considering exiting the market. Tenant demand is strong, so it suggests that increased costs, taxes, and admin burden is taking its toll.”
Meanwhile, new house buyer demand fell for the 11th month in a row in March, Rics found.
While surveyors still expect sales to remain under pressure in the next few months, they were less downcast than in February amid expectations of interest rate rises coming to an end.
It also marked the first time in more than a year that the proportion of surveyors expecting sales to pick up in the next 12 months was positive.
Furthermore, the proportion of professionals who noted a decline in house prices slowed for the first time in 10 months.
He said: “Deals are being done, but a theme coming through in the anecdotal remarks is the need for vendors to recognise the shift in market dynamics.
“Significantly, there is also a sense that the medium-term outlook is looking a little more settled, helped by the perception that the interest rate cycle may be near the peak.”
One professional, based in Yorkshire and the Humber, said the market remains “sluggish” and “many buyers are sitting on their hands simply watching the market.”
Another noted that sales had started picking up since mortgage rates have not risen as high as was predicted last year.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Things may not be as grim as we’d feared six months ago, but buyer demand has been dropping for the best part of a year, so if you’re going to sell, you need to enter the market with clear-eyed pragmatism.
“Agents stress that with buyers thin on the ground, and sales sluggish, only the right properties at the right price are shifting.”