Tenant demand in the private rented sector returned to growth in October, while new landlord instructions continued to decline, according to the latest RICS Residential Survey.
The combination of stronger demand and constrained supply has also pushed rental growth expectations to their highest level since early 2024.
The tenant demand indicator rose to a net balance of +7% in October, compared with -1% previously, according to the quarterly seasonally adjusted rental market data.
However, the supply of rental properties remains under pressure. New landlord instructions recorded a net balance of -30%, indicating that respondents continue to report a decline in the number of landlords bringing properties to the market.
Against this backdrop, expectations for rental growth strengthened. The three-month rental growth indicator increased to +41% in October, up from +29% previously and marking its strongest reading since early 2024.
“Almost the reverse to sales is happening.” said Jeremy Leaf, north London estate agent and a former RICS residential chairman.
“Strong demand is accompanied by falling supply partly because landlords who are selling are not being replaced quickly enough by new, or even old, blood. As a result, rents are firming up despite continuing affordability concerns.”
Higher mortgage rates continue to weigh on sales market
While the lettings market showed signs of strengthening, the wider housing market remained subdued in October as higher mortgage rates continued to affect buyer demand.
The RICS new buyer enquiries indicator recorded a net balance of -24%, unchanged from the previous month. This points to continued negative momentum, with virtually all parts of the UK reporting either falling or stagnant buyer enquiries.
Agreed sales weakened further, with the headline indicator falling to -24% from -18% previously. This was the weakest reading in three months, although it remained less negative than the average net balance of -33% recorded during the second quarter of 2026.
The outlook for sales also deteriorated. The three-month sales expectations indicator fell to -11%, while the twelve-month measure dropped to -17%. The latter represents the most pessimistic reading since July 2023, suggesting respondents expect current pressures on market activity to continue.
Fewer properties coming onto the sales market
The supply of homes for sale also weakened during October. New instructions to sell recorded a net balance of -8%, down from +6% previously, indicating a slight reduction in the flow of properties entering the market.
Market appraisals remained firmly negative, with a net balance of -34%. This was the weakest reading since November 2025 and suggests the pipeline of new listings could slow further over the coming months.
House prices also continued to face downward pressure. The RICS indicator measuring changes over the previous three months fell to -36% in October, compared with -34% in September. The measure has become more negative in each of the past two months after showing signs of stabilising over the summer.
At a regional level, London, East Anglia, the West Midlands and the South East of England all reported weaker house price momentum than the national average. Northern Ireland continued to record firm price growth, while Scotland and the North West of England saw modest increases.
Respondents also became more pessimistic about the year-ahead price outlook. The twelve-month house price expectations indicator fell from zero to -17%, although this translates to a relatively modest anticipated decline of around 1% in point estimate terms.
The regions already experiencing more pronounced price falls than the UK average are also expected to see further softening through 2027.
“The latest slump in confidence shows how decisions in Washington not Westminster are shaping the outlook for the UK housing market.” said Tom Bill, head of UK residential research at Knight Frank.
“Rising mortgage rates have put downward pressure on sales volumes and prices this year due to the energy price shock caused by the Middle East conflict. There is growing pressure on Donald Trump to find a diplomatic solution following the mid-term elections, which means borrowing costs have started edging lower over the last week, a trend that would only accelerate if a lasting ceasefire was agreed.”
