Rental rates are projected to rise at a much faster rate than house prices by 2021, according to new research.
The UK rental market is expected to grow by an average of 19% across the UK over the next five years – providing significantly higher growth than the 13.1% projected for the UK housing market over the same period.
Leading the rental rate increases will be Bristol, where rents are expected to rise by 27.5% over the next five years, with London rising by 24.5% and the cities of Manchester and Birmingham achieving a 17% growth.
The report highlights that these locations, with their knowledge intensive and high tech economies, in addition to their world class universities and wider cultural significance, are beginning to open up the range of opportunities for young professionals beyond the capital – a significant driver behind the projected rental growth.
Commenting on the projections, Lawrence Bowles of Savills Research, said:
‘Rental growth will slow next year because of the tightening affordability and the effects of Brexit. Greater uncertainty, higher inflation, and a weak pound will impact how much households can spend on rents. However, the barriers to home ownership remain high. Renting will remain the tenure of choice for younger households.’
House prices are also expected to see an increase over the next five years, but at a more modest rate. Savills stated that they expect prices to remain steady for 2017, before seeing increases achieved in the four subsequent years totalling a 13.1% rise in 2016 prices.
The projections from Savills match the forecasts from investment management company Jones Lang LaSalle, who also predicted growth of 13.1% over the next five years.