Landlords and overbidding

As a landlord, I’m not deliberately listing properties at an inflated rent in the expectation of accepting an underbid. I’d rather advertise at what I believe is a fair market rent based on comparable properties, condition and local demand. The ban on rental bidding should hopefully make the process more transparent for tenants and landlords alike. If the market tells me the asking rent is too high, then I’d rather adjust the advertised price than build an artificial negotiating margin into it. Ultimately, a reliable tenant and a sustainable tenancy are worth more to me than squeezing out the highest possible rent.

The ban on rental bidding could encourage landlords to price higher from the outset. Advertise too low and you can’t accept a higher offer, while an optimistic rent can still be negotiated down.

Rent increases are also more restricted once a tenant is in place and can potentially be challenged. With demand exceeding supply in many areas, landlords therefore have good reason to set the initial rent towards the top of what they believe the market will support.

The bidding ban has flipped rental pricing on its head: the advertised rent is now a legal ceiling, so landlords are listing at the top of the range and, surprisingly often, getting it. What we at Quanstrom Financial are seeing with our landlord clients is optimistic pricing since 1 May, because offers can only come in at or below the advertised figure.

With more than five enquiries chasing every rental home, tenants who fear missing out are paying the asking rent - and letting agents are working for the landlord, so are of course trying to achieve the best price.

There is a lending angle too, and it is where we spend our days. Buy-to-let lenders assess borrowing against the rent, so the figure achieved feeds into what a landlord may be able to raise at purchase or remortgage. With rent rises now limited to once a year, underselling does not just dent income for twelve months, it can narrow lending options too. Getting the advertised figure right first time has never mattered more.

The ban on rental bidding could make the advertised rent more important, but I don't think we can automatically assume landlords will simply compensate by setting artificially high asking rents.

There is still a market price. If a property is listed too optimistically, tenants can choose not to apply and landlords risk a longer void period.

What will be interesting to watch is whether asking rents begin to include more of a negotiating margin. We could see some landlords list slightly higher knowing they can accept a lower offer, but that is quite different from saying rents themselves have necessarily risen because of the new rules.

Ultimately, the asking rent still has to stand up to what tenants are willing and able to pay.

Banning overbidding has forced a structural shift in property pricing, creating an immediate defensive reaction from landlords. Under the Renters’ Rights Act, landlords can no longer let a highly competitive market dictate the true market rate through natural bidding wars.

As a broker, we see landlords adjusting to this by listing properties at highly optimistic, absolute-ceiling rental prices right from day one. They have to price defensively because if they list too low, they are legally trapped at that rate, which risks breaking their mortgage interest coverage ratios (ICRs) under current 6.44% corporate BTL rates.

It is a logical pivot: you can always negotiate down if a property sits empty, but you can no longer adjust upwards if demand surges. This legislative change is inadvertently driving up initial asking rents across the board, making the market artificially more expensive for tenants from the very first click.

Yes, I think some landlords will respond by pricing higher from day one. If you can no longer accept £2,100 on a property advertised at £2,000, the obvious temptation is to advertise at £2,150 and negotiate down instead.

That is the danger with banning overbidding without fixing the supply problem underneath it. The rule stops bidding wars, which is good, but it does not create a single extra rental property.

The law is clear: landlords and agents in England cannot ask for, encourage or accept rent above the advertised figure, and first breaches can attract penalties of up to £7,000.

If I were letting a property, I would price it at a realistic market rent with enough evidence to defend that figure, then consider sensible offers below it. I would not deliberately inflate it just to recreate a bidding war backwards.

You can regulate the bidding process. You cannot regulate scarcity away.

The ban does not stop landlords aiming high. It changes what aiming high costs. The advertised rent is now a one-way bet: you can come down if it sits, but you can never move up if demand surges. So the number you pick on day one carries far more weight than it used to.

That is a pricing problem, and pricing is where the pain hides. Rents are still rising, up 3.7% on the year, so demand is real, but it is not infinite. Set the rent at genuine local market level and you let quickly. Set it at hope and you fund an empty month chasing a few extra pounds. A void is simply the most expensive form of overpricing.

So the honest answer is neither high nor low. It is to list at what that specific street actually pays, because you now get only one shot at the ceiling.