Rental growth prospects highest in London

Despite support for home ownership in the form of Help to Buy, the UK's private rented is expected to grow by a further one million households, with the resulting pressure on stock pushing up rents, says international real estate adviser Savills, which today released its five year residential market forecasts.  

The private rented sector grew by two million households in the ten years to the 2011 Census, with the sharpest growth being in the mortgage-rationed period since 2007.  This has created pockets of acute stock shortage, particularly in major cities where the demand is concentrated, and Savills now forecasts that average UK rents will rise by 21 per cent over the next five years.
The London mainstream market, where the imbalance between tenant demand and supply is most acute, will see higher rent increases than any other region or market sector.  Here, values for mainstream rental properties are expected to increase by 25.8 per cent over the next five years, marginally outpacing underlying house price growth which is expected to total 24.4 per cent.

"Help to Buy will allow some trapped renters to access home ownership even though costs of home-ownership will exceed those of renting," says Lucian Cook, Savills head of UK residential research. "But we anticipate that the major beneficiaries of any increase in net lending are likely to be existing home owners.
"Its impact on rapidly rising rental demand will be limited, most notably in London where almost 26 per cent of households currently live in the private rented sector, having risen 79 per cent since 2001.
"This makes the London mainstream market a particular target of buy to let investors with equity and institutions whose interest in residential has been reawoken. It also highlights an urgent need for local and national government incentives to ensure the delivery of new rental stock in volume."
View Savills 5 year rental forecasts
Prime London rental values - with average rents of over ?1,800 per week - will have less potential for growth as more new build investment properties come on stream, Savills anticipates, with rents expected to rise by 20.4 per cent over the next five years. 
Read the latest Residential Property Focus here

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