Rents to rise by almost a fifth over next five years

The prolonged lack of new buy-to-let landlords entering the market means that rents, already at record highs across the UK, are forecast to rise by almost another fifth over the next five years.
Savills, the high street estate agent, estimates that on average rents have climbed by 4 per cent this year and predicts that they will rise a further 17.6 per cent between 2025 and 2029.
That would mean increases continuing to outpace wage growth, with Savills’ economists forecasting a 15 per cent increase in average incomes over the next five years.
Rents are already at their dearest on record and in London, by far the most expensive region to rent a home in the UK, the average tenant is paying almost half of their monthly income on rent.
The forecast by Savills will no doubt worry renters, who have seen their other bills, notably gas and electricity, also jump sharply.
The surge in rents since the pandemic has come from a persistent supply-demand imbalance, which ultimately stems from Britain not building enough homes to keep up with a growing population.
The number of people looking for somewhere to rent has eased from the peak in 2021 and 2022, but it remains high, according to the Royal Institution of Chartered Surveyors. However, in its monthly survey last week, RICS reported that supply was worsening.
Reflecting that, homes are letting 20 per cent faster now than they were in the year before the pandemic, Savills said.
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The number of available rental homes has not kept pace with population growth, in part because landlords, in the face of higher mortgage costs and regulatory and tax changes, are not adding to their portfolios, while many are selling up altogether.
Data from Zoopla, the property search website, last month showed that in some parts of the country a third of the homes up for sale had been rented out at some point in the past four years.
“High demand and low supply have been the influence behind the significant rental growth seen over the past few years,” Guy Whittaker, a research analyst at Savills, said.
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“It is challenging to see where an increase in rental supply will come from in the next couple of years. 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.”
As it stands, all rental homes must have an energy performance certificate rating of E or better, but the government is looking to change this so that all rentals are rated as C or above come 2030.
As a consequence, Whittaker expects to see more landlords sell up over the next few years in advance of that, “particularly in markets where the upgrades required would exceed an entire year’s rental income”. He cautioned that if many more landlords left the market rents could rise by even more than he was forecasting.