UK rents are set to grow by a further 17.6 per cent over the next five years, according to property firm Savills, as the imbalance between high demand and low supply continues.
Rental prices grew by 4 per cent nationally in the 12 months to September 2024, less than half the previous year. London rents grew by 1.5 per cent.
UK-wide, it believes the imbalance of demand over supply will continue to override affordability in the short term, driving up rents.
Tenant demand has fallen from its record highs of 2021 and 2022 but continues to remain at elevated levels Savills say.
At the same time, latest listings data indicates the numbers of available rental listings per active letting branch was 16 per cent below 2018-19 levels.
“It is challenging to see where an increase in rental supply will come from in the next couple of years,” Guy Whittaker of Savills said.
“The increase to the existing Stamp Duty Land Tax surcharge for second homes will likely dampen demand from new buy-to-let investors, and it will prevent some existing landlords from expanding their portfolios.
“The potential requirement to upgrade EPC ratings by 2030 may see some leave the sector altogether, particularly in markets where the upgrades required would exceed an entire year’s rental income. In those cases, it may make more financial sense to sell.”
Savills warn that in London, an ‘affordability ceiling’ has already been hit, with the market so expensive, people already cannot afford to rent properties.
It found tenants are already spending two fifths of their income in rents. An inflection point appears to of been reached, Savills believe.
“Slower rental growth through 2023 has led to a slight easing of affordability pressures in London. We expect this trend will continue in the near term with rental growth of 2.5 per cent in London in 2025, against income growth of 2.9 per cent,” Whittaker, of Savills, said.
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