In a recent report released by Savills, projections indicate that average UK rents are set to surge by up to 9.5 percent year on year, marking a significant uptick compared to previous years, although slightly lower than the prior year’s figures. These estimates suggest a relentless climb, with rents soaring by 26 percent since March 2020, sparking concerns about affordability.
Savills anticipates only a marginal slowdown in the rental market next year, with a near-record rise projected. The persistent imbalance between rental supply and demand is expected to drive rents up by a further 6.0 percent in 2024 before hitting what experts term an ‘affordability ceiling’ in 2025.
According to Emily Williams, a director in Savills’ residential research team, the scarcity of available rental properties remains a significant issue. The surge in rental demand, exacerbated by multiple national lockdowns throughout 2021, has consistently outpaced supply. Williams notes that factors like escalating debt costs and altered tax policies have pushed numerous landlords to sell their properties, intensifying the competition for available housing stock. As a result, tenants find themselves bidding higher to secure a tenancy, further propelling rental prices upward in the short-to-medium term.
Despite these trends, the foreseeable future appears bleak in terms of increased rental supply. Higher borrowing costs and shifting landlord dynamics are expected to prolong the scarcity of available rental properties for the next couple of years. This situation is exacerbated by the likelihood that potential homebuyers will remain in the rental sector for longer due to elevated borrowing costs, sustaining the demand. The influx of new rental properties is unlikely until 2026 or beyond, contingent on substantial declines in interest rates.
The report emphasizes that London, in particular, will face prolonged delays in the increase of rental stock. With rental yields already lower in the capital compared to other regions, experts anticipate a slower emergence of substantial premium rates. The combined challenge of limited supply and a marginally stronger economic outlook for London compared to the rest of the UK leads Savills to project a resurgence in rental growth towards the end of the five-year forecast period.
Savills’ projections underscore a persistently competitive rental market characterized by soaring rents and a shortage of available properties, painting a challenging picture for prospective tenants and signalling an enduring landlord’s market in the years to come.