Rents are likely to continue rising sharply in line with the cost-of-living crisis, surveyors are warning.
Property professionals’ expectations that rents will go up in the next few months are at their strongest levels so far this century, findings from the Royal Institution of Chartered Surveyors (Rics) indicate.
A net balance of 63 per cent of professionals expect rental prices to increase over the three months ahead, marking a fresh high in records going back to the second quarter of 1999, Rics said.
Shelter’s most recent quarterly survey of private renters found that one in three (2.7 million people) was already spending at least half their income on rent.
And the latest Resolution Foundation research found that renters spent 34 per cent of their incomes on housing in 2021-22, compared with 9 per cent for mortgage-holders.
The prediction by surveyors adds to a growing picture of a rental housing crisis in the UK.
Tenant demand rose firmly over the three months to July, the institution found.
But, reflecting an imbalance between demand and supply in the rental sector, landlord instructions declined further.
However, the lack of interest by landlords has not translated into more properties changing hands. In the house sales market, a net balance of 45 per cent of property professionals reported new buyer inquiries falling rather than rising.
A net balance of 44 per cent of professionals noted a decline in agreed sales during July, representing the weakest reading for the sales measure since the early stages of the pandemic, Rics said.
New instructions to sell homes also fell in July, indicating a deterioration in the flow of supply.
Rics chief economist Simon Rubinsohn said: “The recent uptick in mortgage activity looks likely to be reversed over the coming months if the feedback to the latest Rics Residential Survey is anything to go by.
“The continued weak reading for the new buyer inquiries metric is indicative of the challenges facing prospective purchasers against a backdrop of economic uncertainty, rising interest rates and a tougher credit environment.
“Just as concerning are the insights being provided around the lettings markets. 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.”
Dan Wilson Craw, deputy chief executive of campaign group Generation Rent, said: “In many cases tenants are being priced out of their homes and forced into the lettings market to compete for a new place to live.
“At the same time, a lot of people who want to move can’t because rents on new tenancies have risen so rapidly. That has a knock-on effect for the number of homes coming on to the market.
“Long-term, the answer is to build many more homes in the places people want to live, including social housing to allow more people to escape private renting.”
Some major mortgage-lenders have been cutting rates this week, amid signs that stubbornly high inflation is easing. The Bank of England uses base rate rises, which affect borrowing costs, as a tool to subdue inflation.
Among the rate reductions, HSBC UK has cut some homebuyer, first-time buyer and remortgage rates on offer by up to 0.35 percentage points, as well as adding a £500 cashback incentive to some deals.
Tom Bill, head of UK residential research at Knight Frank, said: “Some lenders are cutting mortgage costs as the (Bank of England base) rate nears its peak, which means that while sentiment will remain subdued, it should improve in the second half of this year.”
He added that higher mortgage rates had compounded issues for renters “which means the squeeze on tenants won’t vanish in the short term”.
A separate study from property website Zoopla found that 42 per cent of non-homeowners aged under 40 have given up on the idea of getting on the property ladder in the next 10 years.
Even among those earning more than £60,000 a year, 38 per cent said they had given up on the idea of doing so.
The cost-of-living crisis (64 per cent) was seen as the main barrier to homeownership, house prices were highlighted by 51 per cent and nearly half (49 per cent) pointed to higher mortgage rates.
Of those who are planning to buy or are in the process of buying their first home, 85 per cent said they had made financial sacrifices to do so.
Zoopla commissioned a survey of 2,000 UK adults under the age of 40 who do not own a home.
Additional reporting by PA