An agency has moved to suggest that average rents in the UK will increase by between 3% to 4.5% during the next five years.
JLL predicts that average rents across Britain will increase by 4.5% in 2016, followed by 4% in 2017. Further predictions suggest that rents will then rise by 3.5% in 2018 and 2019, before slowing to 3% in 2020.
Growth
‘Despite believing that demand will increase and available supply will remain constrained, we anticipate only moderate positive rental growth on a national basis over the next five years,’ noted Adam Challis, head of residential research at JLL. ‘The main limiters are that tenants will move to smaller properties or to cheaper areas in order to ensure their rental costs suit their financial aspirations,’ he added.[1]
Research from the agency’s report indicates that nearly half of all 25 to 34 year olds privately rent, with this proportion likely to rise further in the next 5 years.
Tax
JLL indicates that the majority of British buy to let landlords are higher-rate tax payers and will therefore be significantly affected by the recently proposed tax changes within the sector. However, it believes that there will not be a significant exodus of landlords from the industry.
Challis warns that, ‘there may be slightly less exuberant enthusiasm from new investors, which may have a longer-term impact on rental supply.’[1]
Mr Challis also said that the big potential growth area within the sector is Build to Let. With this said, he also believes this part of the private rental sector, ‘will always be dwarfed in volume terms by private landlords.’[1]
[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/11/rents-set-to-grow-3-0-to-4-5-over-each-of-next-five-years-says-agency