Global property consultancy JLL anticipates robust expansion in the UK rental market for the upcoming year, attributing this positive outlook to a scarcity of new rental stock and a challenging interest rate environment.
According to JLL, the growth in rental rates is expected to outpace wage increases in 2024, with rental prices nationwide projected to surge by 5.0 per cent. This follows a trend in 2023 where UK rents, on average, increased by approximately 6.0 per cent, with Greater London experiencing a more significant uptick at 7.0 per cent.
JLL underscores the persistent undersupply of homes in the UK, emphasizing a cumulative shortfall of around 1.5 million homes since the mid-2000s when housing targets were introduced. The consultancy predicts a worsening of this undersupply issue, with a cumulative shortfall of 720,000 homes forecasted between 2023 and 2028.
On the sales front, JLL’s outlook for 2023 suggests that prices will conclude the year around 6.0 per cent below January’s figures, with London witnessing a 4.0 per cent decline. Looking ahead to the period from 2024 to 2028, JLL forecasts a bottoming out of prices in 2024, with expectations of single-digit annual declines until December 2024. A return to growth is anticipated in 2025, coinciding with declining fixed rates and a more certain market outlook.
Regarding rental growth, JLL foresees the persisting scarcity of new rental stock and the challenging interest rate environment as key factors propelling rental growth beyond wage growth. A five per cent increase in rental prices across the UK is expected in 2024.
Marcus Dixon, JLL’s residential research director, remains cautiously optimistic about the UK property market’s resilience, stating, “Despite the uncertainties faced by the UK property market, we have seen resilience and stability over the past year. Looking ahead, we forecast a bottoming out of prices in 2024, with single-digit annual falls likely. The UK housing market still faces challenges in terms of supply, with a cumulative shortfall of 720,000 homes expected between 2023 and 2028. Addressing these structural barriers is crucial for achieving meaningful increases in supply and mitigating affordability issues.”