UK rents are expected to climb by 15% over the next five years, as the supply of rental accommodation dwindles while demand from tenants continues to go up, according to a survey.
Rents are expected to increase by nearly 2% across the UK over the next 12 months, according to the latest survey from the Royal Institution of Chartered Surveyors (RICS).
Small landlords are selling up following tax changes that have made buy-to-let properties less lucrative. RICS said they are being hit by the withdrawal of tax breaks and the extra 3% on stamp duty on second homes. At the same time, more people are looking to rent, partly because they cannot afford to buy their own homes.
The survey showed a net balance of 22% of respondents reported a fall in new landlord instructions in the last three months. It is the eighth consecutive quarter that the number of rental properties on the market has fallen, and this is happening in virtually all parts of the country, RICS said.
The shortfall in new rental accommodation is predicted to push rents up by 15% by the middle of 2023. East Anglia and the south-west of England are likely to see the sharpest growth over the period.
Simon Rubinsohn, the chief economist at RICS, said: “The impact of recent and ongoing tax changes is clearly having a material impact on the buy-to-let sector, as intended. The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the build-to-rent programme, or government-funded social housing.
“At the present time, there is little evidence that either is likely to make up the shortfall. This augurs ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.”
The residential property sales market remains flat overall, although Scotland, Northern Ireland, much of northern England, the Midlands and Wales are recording more transactions and higher price rises.
The RICS headline price balance edged up to 4% from 3% in July while the newly agreed sales balance was close to zero for the fourth month.
In London, prices are still falling with the balance at -40% while the south-east and East Anglia are seeing small price declines. Several surveyors told RICS that uncertainty caused by the deadlocked Brexit negotiations was weighing on the market, along with rising interest rates.Figures from the tenant referencing company HomeLet showed average rents in London rose 3.3% year-on-year in July to £1,615 while the average rent in the rest of the UK was up 1% to £777.