Rents set to rocket 18% as demand outstrips supply says big agency
Agency says there will be some 'brakes' on rental prices, especially in London, but overall the demand will far outstrip supply.
Rents are set to rocket nearly 18% over the next five years with less rentals available as investors leave the market, Savills warns.
There will be some ‘brakes’ on the rise in rents, such as tenant affordability, Savills says, but overall there is a steep upwards trend.
Rental prices grew by 4% nationally in the 12 months to September, which was less than half the previous year.
20% faster
But the latest data shows that the number of available rental listings per letting branch in September was 16% below the 2018-19 level.
And properties are letting 20% faster in 2024 to date than five years ago.
It is challenging to see where an increase in rental supply will come from in the next couple of years.”
Guy Whittaker, Research Analyst at Savills, says: “At a national level, this pattern looks set to continue with rents expected to rise above incomes again.
“It is challenging to see where an increase in rental supply will come from in the next couple of years,” he warns.
And the recent increase in the Budget to the Stamp Duty for second homes, will probably dampen demand from new buy-to-let investors, he says.
Investors exit
The requirement to upgrade EPC ratings by 2030 may also see some investors leave the sector, he says, particularly where the upgrades required would exceed an entire year’s rental income.
Looking further ahead, Savills expects rental growth to be more aligned with income towards the end of the five-year period.
While London, where rents grew by just 1.5%, the market is already experiencing the drag effect of affordability. With Londoners spending as much as 43% of their income on rent in 2023.
Read more about rising rents in London.
18% over 5 years is hardly “rocketing”: it’s just 3.25% compounded: quite possibly less than inflation or salaries. At current interest rates any landlord with more than, say, 50% LTV for mortgages is going to be making a loss, and of course her maintenance and materials costs and her taxation and licensing costs could easily raise by more than 18%, especially with the Rental Reform Act despoiling the market.
Why do articles like this only look at the costs faced by tenants, and never those by landlords?
We obviously need rent controls………
Why oh why cant the political class grasp the most fundamental principle of economics: Demand and supply elasticity? High demand and low supply = price increase. They must know that, therefore they must be complicit and wilful when it comes to spiralling rents.