Tenants face potential escalation of rental costs as landlords vacate properties

The UK property market is showing signs of recovery, as indicated by the latest report from the Royal Institution of Chartered Surveyors (RICS). The survey, which covers the period from April to June, shows that house prices were broadly flat during this time, with a slight improvement in July.

RICS members expect house price falls in most UK regions to turn into increases soon. This optimistic outlook is partly due to the recent drop in average mortgage rates, which has made home buying more affordable for many. According to RICS, lower mortgage costs are a significant factor in the improved housing market sentiment.

The RICS survey also reveals that sales expectations are at their strongest since January 2020. This optimism is echoed by estate agents and surveyors, who expect market activity to increase in the months ahead. Nationwide reported a 19-month high in UK house price growth in July, with house prices jumping 0.8% last month, as reported by Halifax. Zoopla recently stated that the property market is heating up.

However, the rental market is not as positive. The gap between demand and supply continues to widen, suggesting potential rent increases. Despite increased rental supply, tenants face affordability challenges. The rental market is seeing a rise in tenants, while landlord numbers have fallen again. Many buy-to-let landlords are looking to exit the market, which could further exacerbate the rental market's challenges.

Landlords and tenants expect continued rent increases of approximately 3% by the end of the year amid economic stagnation and possible tax hikes announced by the finance minister for November 2025. This could put further pressure on tenants, who are already struggling to keep up with rising rents.

The full impact of the interest rate cut and housing reform announcements will not be evident until next month's RICS report. The new government's focus on boosting housing development and the base rate cut have shifted the sales market's mood, according to Simon Rubinsohn, chief economist at RICS. Sarah Coles, head of personal finance at Hargreaves Lansdown, states that estate agents have faith that interest rate cuts will revitalize the market.

In conclusion, while the UK housing market is showing signs of recovery, the rental market continues to face challenges. As the economy continues to evolve, it will be interesting to see how these trends develop in the coming months.