BLOGS

A rental market under pressure, a sales market losing momentum

The UK's private rented sector is being squeezed from two directions at once. On one side, RICS's monthly Residential Market Survey has consistently reported a positive tenant demand balance through 2025 and into 2026, even as new landlord instructions balances remain negative — a combination that has defined the post-pandemic rental market and shows little sign of easing.

On the other side, the sales market remains fragile. Higher-for-longer mortgage rates, stretched affordability and cautious buyer sentiment have kept transaction volumes below pre-2022 norms, according to HM Land Registry completions data, while Rightmove and Zoopla both continue to report subdued new buyer enquiries relative to available stock in large parts of England and Wales.

This imbalance is not incidental — it's structural. Landlords exiting the sector under Section 24 tax changes, tighter EPC requirements and rising regulation (including the Renters' Rights Act reforms) have removed supply precisely as demand has stayed strong. REalyse data shows listing volumes for rental stock in several southern English postcode districts have thinned relative to 12 months ago, even as achieved rents and rental yields in the same areas have held firm or risen — a signature of a supply-constrained market.

What the numbers say about rent growth

Regional rent growth data tells a consistent story of demand absorbing limited stock. ONS Private Rent and House Prices data has shown annual rent inflation running at elevated levels across the UK since 2023, with London, the North West and parts of Scotland among the highest-growth regions in recent readings. REalyse's own achieved rent tracking mirrors this pattern: 12-month average achieved rents in high-demand urban postcode districts have consistently outpaced asking rent growth, implying landlords are achieving close to — or above — asking price with minimal negotiation.

Days-on-market figures reinforce the picture. Where REalyse data shows rental listings letting in a matter of days rather than weeks, void periods for landlords are minimal, which is precisely the yield-compressing, demand-absorbing dynamic that institutional investors underwriting BTR schemes are targeting. For an investment analyst assessing a scheme's rental assumptions, a market with short days-on-market and rising achieved rents is a stronger underwrite than one reliant on capital appreciation alone.

Institutional capital is following the signal

Build-to-rent has moved from a niche institutional strategy to a mainstream allocation for pension funds, insurers and dedicated BTR platforms, precisely because it offers income stability that a fragile sales market currently cannot. REalyse's planning pipeline data — which tracks BTR-flagged schemes by unit count, planning stage and location — shows a pipeline concentrated in regional cities including Manchester, Birmingham, Leeds and Glasgow, alongside continued activity in Greater London.

This regional tilt is a rational response to the yield and demand data: secondary cities typically offer stronger gross rental yields than London, while still benefiting from the same tenant demand pressures reflected in RICS surveys and ONS rent series. Development managers using REalyse to benchmark proposed BTR schemes against local comparables are increasingly finding suburban and regional single-family and multifamily BTR products underwritten on rent growth assumptions of several percentage points annually — assumptions that current REalyse achieved-rent data and days-on-market figures broadly support in supply-constrained districts.

Planning stage data also matters here. Schemes that have moved from "in progress" to "granted" status represent near-term investable supply, and tracking this conversion rate by local authority gives investors and lenders an early read on where BTR completions — and therefore new rental supply — will land over the next 18 to 36 months.

Outlook: a structural shift, not a cyclical blip

The forces driving BTR expansion look structural rather than temporary. Landlord exits tied to regulatory and tax changes are unlikely to reverse quickly, mortgage affordability constraints on first-time buyers show only gradual improvement, and tenant demand — as captured in RICS's demand balance — has proven resilient through multiple economic cycles since 2022.

For institutional investors, lenders and developers, the evidence base for BTR allocation is increasingly data-led: regional rent growth trends, yield comparables, days-on-market benchmarks and a granular planning pipeline together build a picture of where rental demand is most acute and least served by existing stock. As the sales market searches for its footing, build-to-rent looks set to keep absorbing a growing share of both tenant demand and investment capital.