The sales market is slowing down but rents are continuing to increase rapidly, the RICS Residential Market Survey for June has found.
What’s more, most agents think the cost of renting will continue to skyrocket in the next 12 months.
House price growth has slowed, while those priced at more than £1 million are selling less than the asking price.
The number of new buyers coming to the market fell for the second month in a row, while the number of home sales are falling.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: The rental market remains red hot, and runaway rents continue to push costs up alarmingly for tenants. It’s yet another month when we’ve seen demand rise and supply fall, which is inflating rents alarmingly.
“Landlords are selling up, which is partly an effort to cash in on higher prices at the top of the market. However, overwhelmingly agents say they’re getting out of the business because of the increase in legislation.
“Several mentioned concerns about the white paper, published in mid-June, which is a vital step forward for tenants’ rights, but adds more responsibilities for landlords, and includes measures making it more difficult to raise rents. There’s a reasonable chance it could persuade even more to sell up.
“The legislation also makes it more difficult for landlords to end a tenancy. This is making them pickier about tenants, which means that anyone without a spotless rental record could find it increasingly difficult to find a home to rent at all. RICS is calling for the next prime minister to make life easier for landlords, in order to ensure enough of them remain in the business to keep a lid on rental costs.”
She added: “The property market is coming off the boil, with demand falling again, supply flat, and sales slowing. A desperate lack of property available to buy is keeping prices rising, but the fire has gone out, so the latent heat in the market is cooling.
“Rising prices, the threat of higher interest rates, and now the uncertainty of the political landscape are finally taking a toll. The agent comments included some of the most negative predictions we have seen.
“The buyers are still there, but they’re increasingly cautious, and they’re keeping one eye on how bad things are going to get for them financially. As life gets tougher, more of them are pulling out of agreed sales and trying to negotiate a lower price.”
There’s speculation that the base rate could rise by 0.5% in August, as the Bank of England struggles to keep inflation under control.
Tom Bill, head of UK residential research, Knight Frank, said: “Mortgage offers made on more favourable terms earlier this year will begin to expire in coming months, meaning buyers may have to reassess their plans.
“Combined with economic news that is going to get worse before it gets better, and the fact supply is rebuilding, downwards pressure on house prices will intensify after the summer. In the unlikely event of a general election this year, both activity and price growth would slow further.”