BLOGS

A market under pressure from three directions at once

UK residential landlords are navigating a rare convergence of forces this cycle. The Renters' Rights Act is reshaping the legal and commercial terms of letting property, student lettings markets in university cities are absorbing licensing and demand shocks, and an estimated five million UK households are still working through the mortgage refinancing cliff as fixed-rate deals agreed during the low-rate years roll onto materially higher rates.

Individually, each pressure would be manageable. Together, they are changing how landlords, developers, agents and lenders think about supply, pricing and risk across the rental and sales markets. REalyse data shows the effects are already visible in asking rents, days on market, transaction volumes and new-build activity — though the picture varies sharply by region and property type.

Rental supply is tightening as landlords reassess the model

The Renters' Rights Act removes Section 21 "no-fault" evictions, moves tenancies onto a rolling periodic basis, and tightens rules around rent increases, possession grounds and property standards. For portfolio landlords and smaller buy-to-let owners alike, this changes the risk calculus of holding residential stock — particularly where properties are older, harder to bring up to compliance standards, or located in areas with weaker rental demand.

REalyse rental listings data across UK regions shows average asking rents ranging broadly from under £900 a month in parts of the East Midlands to well over £2,500 a month in London and the South East, with typical days on market sitting in the four-to-eight-week range across most regions. Twelve-month asking rent growth has averaged in the mid-single digits nationally over the past two years, but with wide regional variation — some markets have seen growth push into double digits where supply has tightened fastest, while others have seen asking rents ease slightly as affordability limits bite.

That divergence is the story. Where landlord exits are concentrated — often in lower-yielding, higher-compliance-cost segments such as older houses in multiple occupation (HMOs) or leasehold flats with cladding or service charge issues — REalyse comparables show rental stock thinning and days on market compressing as remaining supply is absorbed faster. Where institutional build-to-rent and professionally managed stock is expanding, the picture is more stable, with landlords better placed to absorb compliance costs and longer tenancies.

Student lettings: a market in flux

University towns add a further layer of disruption. Selective licensing schemes, HMO Article 4 directions and the Renters' Rights Act's changes to fixed-term tenancies (traditionally used to align lettings with the academic year) are forcing student landlords and letting agents to rethink cycles that have run largely unchanged for two decades. Purpose-built student accommodation (PBSA) operators are, in some cases, better positioned than private landlords to absorb these changes, given professional management and existing compliance infrastructure — a dynamic REalyse's planning and pipeline data can help investors track city by city, comparing PBSA delivery pipelines against private HMO stock levels and local student population data.

For lenders and investors assessing exposure to university cities, the combination of licensing costs, tenancy structure changes and softer year-on-year enrolment in some institutions warrants closer monitoring of voids, achieved rents and landlord turnover at the postcode level rather than relying on city-wide averages.

Higher mortgage costs are cooling — not collapsing — the sales market

On the sales side, the refinancing of an estimated five million UK mortgages onto higher rates continues to weigh on affordability and transaction volumes. REalyse transaction data across UK regions shows average sold prices per square foot ranging from roughly £160 in more affordable regional markets to over £700 in prime London locations, with regional average price paid spanning from under £160,000 to more than £700,000 depending on geography and property mix.

More striking is the shift in new-build activity. REalyse transaction data shows new-build homes accounted for a meaningfully higher share of completed sales in mid-2024 — commonly in the 10–20% range across several regions — than in the most recent months of data, where new-build shares have fallen toward low single digits in some regions. This is consistent with housebuilders pacing delivery more cautiously against softer mortgage-dependent demand, and it has direct implications for anyone underwriting development appraisals or GDV assumptions: absorption rates that held through 2023–24 cannot be assumed to hold through 2026 without local verification.

For buyers reliant on mortgage finance, the combination of higher borrowing costs and Renters' Rights Act-driven landlord exits is a double-edged sword. Some ex-rental stock is reaching the sales market as landlords sell up, which can support transaction volumes and offer opportunities to owner-occupiers and cash-rich investors — but it also means agents need sharper, more local pricing evidence to manage vendor expectations in markets absorbing extra supply. As with any market where recent completions are still registering, REalyse notes the most recent one to two months of transaction data should be treated as provisional given standard registration lags.

What this means for landlord and investor strategy

For institutional investors and developers, three practical implications stand out:

• Segment by compliance exposure, not just yield. Older, harder-to-upgrade stock (poor EPC ratings, unlicensed HMOs, leasehold flats with unresolved building safety issues) carries materially higher regulatory and cost risk under the Renters' Rights Act than newer, professionally managed stock — even where headline gross yields look comparable.

• Track landlord exit patterns at postcode level. REalyse comparables and listings data can help identify where private landlord stock is transitioning to the sales market, which is useful both for sourcing acquisition opportunities and for anticipating localised supply shocks in the rental market.

• Re-underwrite rental assumptions with current comparables. With days on market and achieved rents shifting quickly in some submarkets, appraisals and loan collateral valuations benefit from refreshed, granular comparables rather than trailing 12-month averages — particularly in university cities and HMO-dense areas.

Outlook

The Renters' Rights Act, student lettings disruption and elevated mortgage costs are unlikely to resolve into a single clean market trend. Instead, expect continued bifurcation: professionally managed, compliant rental stock and well-located new-build in strong employment markets should hold up reasonably well, while older, harder-to-compliance-upgrade stock and secondary locations face more pronounced landlord exits, softer demand and slower absorption.

For developers, lenders and investors, the practical response is the same one that has served through previous cycles of regulatory and rate-driven disruption: work from granular, current market data rather than national headlines, and re-test assumptions on rents, yields and absorption at the postcode and property-type level before committing capital.