Renters in the UK can expect their bills to rise by almost a fifth over the next five years as demand continues to outstrip supply, says estate agent Savills.
Renters will pay 17.6 percent more by 2029, and rents are expected to increase 4 percent in 2025.
A squeezed private rental stock will be overwhelmed by demand in the coming years as beleaguered homeowners avoid the market due to rising mortgage costs, more red tape and changes to stamp duty rates for second homes.
Rent increases: Renters will pay 17.6% more by 2029, and rents are expected to soar 4% in 2025
This decline will continue to reduce the availability of private rental properties, driving up monthly rents.
Renter demand has slowed from the all-time highs seen in 2021 and 2022, but is still at elevated levels.
Latest figures show the number of rental listings available per rental branch fell 16 per cent in September compared to 2018-19 levels, and rentals have been snapped up 20 per cent faster so far this year .
Homeowners have left the market in increasing numbers in recent years due to stricter legislation and sky-high mortgage costs, which have made investments unsustainable.
Brokers fear more homeowners will stop investing after Chancellor Rachel Reeves stripped away stamp duty on second homes in the Budget.
Guy Whittaker, associate director at Savills, says: “Increasing the stamp duty land tax surcharge for second homes is likely to reduce demand from new buy-to-let investors and prevent some existing homeowners from expanding their portfolios.”
‘The potential requirement to improve energy performance ratings by 2030 may cause some to leave the sector altogether, particularly in markets where the improvements required would exceed a full year’s rental income. In those cases, it may make more sense to sell.”
However, rental growth in some markets could slow as an “affordability ceiling” is reached, according to Savills. In London, renters spent up to 43 percent of their income on rent in 2023.
Supply: The latest figures show that the number of rental listings available per rental branch decreased by 16% in September compared to 2018-19 levels.
But rents in the capital grew by just 1.5 per cent in the 12 months to September 2024, compared with 4 per cent nationwide, as affordability fell.
Whittaker says slow growth in London has led to a slight easing of affordability pressures and Savills forecasts 2.5 per cent growth for the capital’s rents next year.
Slightly stronger rental growth of 3 percent is expected towards the end of the forecast period in 2028 and 2029.
But the capital’s growth in the five years to 2029 is expected to be just 14.2 percent, 3.4 percentage points lower than the growth forecast nationwide.
L.evans@dailymail.co.uk
