Rent forecasted to rise 17% over the next five years, according to JLL
Despite a rapid rise in rents over the past three years, real estate firm JLL is forecasting that rents will increase by 17% over the next five years.
The latest ‘Residential Forecast 2025-2029’ shows that while UK rents surged by 27% in the five years to September 2024, the current supply-demand imbalance is gradually easing.
London is projected to see a significant 18% increase in rents over the same period. JLL is also predicting that more landlords will leave the private rented sector (PRS) than enter because of the 5% surcharge on additional homes.
In the housing market, JLL anticipates a 20% rise in house prices over the next five years, driven by lower mortgage rates attracting buyers back to the market.
But the forecast paints a worrying picture for renters, who are set to face further financial pressures.
‘Rental market will exceed wage growth’
“The supply demand imbalance which has in part driven rent rises (wage growth and inflation also contributed) is now becoming more balanced, but a lack of new stock entering the market means we anticipate rental growth will exceed wage growth and inflation over the next five years,” the report states.
It goes on to warn: “The October Budget did little to change our view. The Capital Gains Tax for residential property remaining the same, meaning exit costs didn't rise, but entry costs did.”
"Landlords looking to purchase homes now have to pay an additional 2% stamp duty over the previous already elevated bill.
“We expect this will mean more traditional buy to let landlords leave the market than enter over the next five years," the report concludes.
Factors influencing the rental market
The report highlights several key factors that could further influence the rental market, including upcoming energy efficiency standards, the Renters’ Rights Bill, and fluctuations in mortgage rates and housebuilding levels.
“The impending energy efficiency standards could lead to landlords offloading less efficient properties or removing them from the market for retrofitting, potentially driving up rents,” the report states.
Meanwhile, the Renters’ Rights Bill may limit excessive rent increases, but it could also prompt some landlords to exit the market, especially if the courts become overwhelmed with cases.
The absence of significant buyer incentives in the recent budget may impact demand, particularly for first-time buyers. However, future policy changes could influence market activity.
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