The Royal Institution of Chartered Surveyors is warning that rents are set to rise further.

In its latest market snapshot the organisation, which measures sentiment amongst its agent members, says rising tenant demand and constrained supply continued to put upward pressure on rents throughout August. 

And the sentiment is that demand is rising and supply falling. The monthly tenant demand net balance stood at +18%, while landlord instructions remained negative at -14%.

And the net balance of respondents expecting rents to rise over the next three months increased to +44%, from +33% in July. 

Over the next twelve months, respondents expected UK rents to increase by around 3% on average.

In the sales market there is more optimism with sentiment for buyer demand and agreed sales moving away from recent lows. 

However, both indicators remained negative, whilst interest rate uncertainty continued to weigh on prospects of recovery.

The net balance for new buyer enquiries rose to -19%, its least negative reading since January and fifth consecutive improvement. 

Agreed sales recorded a net balance of -17%, the least negative result since February and an improvement from April’s low of -38%.

Expectations for sales over the next three months moved closer to neutral territory, with a net balance of -3%, raised from -13% in July. 

Looking twelve months ahead, a net balance of +6% of respondents anticipated higher sales volumes, compared with +3% previously, pointing to a modest improvement in confidence.

House prices remained under downward pressure. The headline price net balance edged up to -28% from -29% in July, extending a gradual improvement from April’s -35%. 

Respondents still expected price reductions over the next three months, with a broadly stable outlook over the next twelve months.

Regional differences persisted. 

London’s price balance remained more negative than the headline average, although it improved on July. Northern Ireland continued to report rising prices, whilst the North West of England maintained a period of gentle price growth.

The flow of new sales listings was broadly unchanged, with the new instructions net balance at zero, compared with -2% in July. A market appraisals balance of -17% indicated weaker activity than a year earlier, suggesting limited scope for a near-term expansion in the listings pipeline.

RICS Head of Market Research and Analysis, Tarrant Parsons, comments: “August’s results show a market that is gradually finding its footing, with key activity indicators having become progressively less negative over recent months. That said, any potential recovery remains fragile and faces two significant near-term tests.

“The Bank of England’s increasingly hawkish tone, on the back of renewed volatility in global energy markets, is a reminder that the borrowing cost outlook could yet deteriorate further. 

“And with the October Budget approaching, speculation over potential changes to property taxation is adding another source of caution for both buyers and sellers. As such, headwinds over the shorter term remain pronounced, even though recent market trends have appeared more stable.”