Rents are expected to soar by 15% in the UK over the next five years as fewer rental properties become available while demand from tenants rises, a survey has revealed.
“One consequence of this imbalance” the Royal Institution of Chartered Surveyors (Rics) said was that rents will rise by nearly 2% over the next 12 months.
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.
Rics said that small landlords have been selling up their properties following tax changes that made buy-to-let properties less lucrative, while more people are looking to rent, partly because they can’t afford to buy a home.
The Rics survey showed, for the eighth consecutive quarter, the number of rental properties on the market has fallen.
The latest results reveal a net balance of 22% respondents “seeing a fall rather than rise” in new landlord instructions in the last three months.
By the middle of 2023, rents are expected to increase by 15% with East Anglia and the south-west of England 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.”
He added: “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.”
Property sales, Rics said, remains flat overall, although Scotland, Northern Ireland, much of northern England, the Midlands and Wales are recording more transactions and higher price rises.
In the capital, prices are falling with the balance at -40% while the south-east and East Anglia saw “very modest price declines”.
Several surveyors told Rics that uncertainty caused by the deadlocked Brexit negotiations was weighing on the market, along with rising interest rates.