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Rents set to rise significantly

Rents across the UK are set to increase sharply over the next five years, as more people choose to rent, rather than buy property, partly as a result of uncertainty around Brexit, according to Savills.

The estate agency forecasts that rents will rise by 19% between now and 2021, while home purchase prices will only increase by 13%.

Average rents are expected to rise by 24.5% in London by the end of 2021 – mainly because the cost of buying property in the city is so expensive.

Upward pressure on rental prices looks set to be caused by would-be first-time buyers being forced to rent as housing market conditions get tougher, while recent tax changes deter many buy-to-let landlords from investing further in the private rented sector, which would suppress the levels of homes in the PRS, according to Savills’ predictions.

While rents look set to rise, Savills expects home price growth to be largely flat over the next two years as Brexit negotiations leave home buyer sentiment “fragile”.

The research follows a Nationwide report that residential property prices in the UK had ended a 15-month growth run in October amid Brexit uncertainty. The mortgage lender said the average UK house price was unchanged in October when compared to September.

Savills predicts UK house prices to be flat on average in 2017, grow by 2% in 2018, by 5.5% in 2019, by 3% in 2020 and by 2% in 2021. Over the five years, house prices will grow by 13.1%.

Lucian Cook, Savills UK head of residential research, said: “Brexit has forced the market to change gear and created uncertainty.

“The period of negotiation with the EU is likely to be a rollercoaster of confidence.

“Buyer sentiment across all sectors of the market is likely to be fragile during the period of negotiations to leave the EU.”

Rents  
Year Rents
2017 +2.5%
2018 +4%
2019 +5%
2020 +3.5%
2021 +3%
Five year total +19%

Source: Savills

  •  G romit

    For many Landlords 19% will NOT cover the additional tax that s.24 Finance Act 2015 (aka #TenantTax) that George Osborne imposed. 30-50% will be nearer the mark, just happened in Ireland when they introduced a milder form of this tax restriction.

    Of course, the Government and its cronies will say that only 1 in 5 Landlords will be affected, what they omit is that those 1 in 5 own 80% of the rental properties. Conservative (small "c") estimates say 4.5m tenants and their families will face higher rents, many will have to move because they cannot afford the higher rent, and some will be evicted because there will be nowhere else for them to go. The disruption, and misery will be on an unprecedented scale.

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    Barry F you talk some drivel as if rents rise say 3% and if a tenant can not then afford the rent then they should not be in the property and wouldn't be if they had been properly credit checked at the outset.

     G romit

    I return the compliment, as you obviously don't know how this works. I don't know of any credit check agency that currently checks if a Tenant can afford a future 30-50% rent rise. Likewise, those Landlords in the Housing Benefit sector would not have a single tenant if they credit checked their tenants. I don't know any Landlord who re-runs credit checks during a tenancy (why would they? - do I need to explain as well?).

    The answer is not a one size fits all. Some tenants will just pay the higher rent (to avoid the upheaval, extra commute costs, etc or maybe they haven't had a rent rise for several years), others may not want to spend that much more on rent and move, and yet others who cannot afford the higher rent will have no choice and have to move (or be evicted).
    Recent research by Spareroom.co.uk found that:
    If rents went up by less than £25 per month, almost one in four
    UK tenants (23%) would have to move
    • If rents went up by less than £50 per month, four in ten UK
    tenants (42%) would have to move
    • In London/South East that becomes almost one in two (47%)

     
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    Just as mortgage lenders stress test their clients, landlords will now have to stress test their tenants, something which has not been necessary in the past as rent increases during a tenancy have been the exception in the PRS.

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    I'm not sure why Paul Robinson finds it necessary to be rude, especially as Barry F talks total sense. And actually I think Savills have got it wrong, rents will rise higher than they predict.

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    Paul - Barry is right on every count. How on earth do you equate a government-inflicted rent rise with a tenant being properly credit checked?? There is no correlation between the two. What Barry is saying is that 30-50% increases over 4 years is going to happen, which can ONLY mean rents go up, or huge numbers of people get evicted. Not good for anybody.

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