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Rent rise next year forecast to be one of highest ever

The latest lettings market forecast from Savills says average UK rents to end 2023 at up 9.5 per cent year on year – lower than 2022, but higher than any other year on record.

This will mean that typical rents have risen 26 per cent since March 2020.

And there’s only modest respite next year , when a near record rise is anticipated.

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Savills forecasts that the imbalance between supply and demand means UK rents will rise a further 6.0 per cent in 2024 before hitting the ‘affordability ceiling’ in 2025.

A greater supply challenge and stronger economic outlook means that London rents will begin to rise more strongly than the UK average by the end of the forecast period: the South East and South West will see the highest five year growth, as lower yields mean stock constraints will prevail for longer.

Emily Williams, director in the Savills residential research team, comments: “Homes to rent continue to be in significant short supply. The end of a series of national lockdowns sparked increased rental demand in mid-2021 that has consistently outstripped supply ever since. At the same time, the rising cost of debt has impacted the profitability of many mortgaged landlords. This, together with a changed tax and policy environment, is forcing an increasing number to sell their properties.

“As a result, competition for stock is tough, and tenants are having to bid upwards to secure a tenancy, supported – but only in part – by a strong growth in incomes, fuelling rents upwards in the short-to-medium term. 

“It’s very difficult to see where an increase in rental supply will come from in the next couple of years. Higher borrowing costs will also keep would-be-buyers in the rental sector for longer, underpinning demand, and while some landlords will be able to transact in cash to avoid the higher cost of debt, this is unlikely to move the dial on supply. Any significant increase in stock in the sector will be delayed until 2026 and beyond, when interest rates have fallen more substantially.”

But any increase in rental stock in London specifically will be further delayed, Savills says. 

With rental yields already lower in the capital, it will take a longer time for a significant premium over the risk free rate to emerge. 

This supply challenge, in addition to a slightly stronger economic outlook for London over the rest UK, means Savills expects London rental growth to begin to show stronger rental growth again by the end of the five-year forecast period.

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    Of course rents have risen and will continue to rise.
    All our costs have risen.
    Just as costs for everyone else have risen. Homeowners have been far more impacted by increased mortgage costs than tenants have.
    In HMOs tenants have also been largely protected from the huge utility price increases we faced a couple of years ago.

    Rents for existing tenants can only increase annually regardless of how frequently a landlords costs increase.
    The biggest increases tend to be on new tenancies but only because some older tenancies have been in existence for several years and rents weren't routinely increased back in the days of falling or static interest rates. Some of mine have been in situ for over 7 years and didn't have a rent increase until last October. Even after 2 rent increases they are still around £80 per person per month below market rent for a new tenant.

    It also needs to be remembered wages and Benefits have risen every year. While the LHA has been frozen other Benefit income has risen and a whole raft of extra financial support has been invented for low income households.
    A great many tenants aren't on low incomes. Rents at the higher end of the market are often considerably lower than the mortgage payment would be if someone bought the same house, with the added bonus of not having to pay huge fees for conveyancing or SDLT and be able to move in and out quickly without the stress of buying chains.

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    Yes I agree, mine will be going up again. Mortgages now approx 300pcm more than they were 12-18 months ago, and I can't absorb all of that increase.

     
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    The Intended Consequences of the LANDLORD REFORM BILL. Choked supply, Driven out Private landlords who provided Rental in all parts of the Country to people in all walks of life. The result virtually all Rental accommodation now unaffordable Congratulations.
    All this just to replace us with Big Corporate landlords & Institutions who will only provide Multi Story Flats in prime locations, mostly in big Towns & City Centres.

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    Just read an Article in my London. A tiny Flat with no bedroom, no oven, no bed sofa surf, above Shops in Greenford Road, £1’150.00 pm.
    I have a Double Bedroom Flat with large living room fully fitted Kitchen with all Appliances. Showed & Toilet, independent CH & Hot water. + Parking for £230.00 pm less just around the corner, Fact.
    I also have a modern 4 Double Bedroom 3 Storey Town House, Parking and HMO Licensed vacant because it not acceptable to me to Rent it out with the incumbents of The Renter’s Reform Bill. Scrap it now you Morons.

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    I am a mortgage advisor, I seem to recall George Osbourne stating back in 2015 that because of the housing shortage, he was going to make landlords sell up so that FTB can get on the ladder. He had measures that would allow that to happen and here we are, 8 years later and the whole industry has gone.

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    I still don't get why it matters if someone owns a house or rents it. Either way unless it's a short term holiday let it's a house and it's someone's home.
    With a growing population we need more homes of every tenure. If we want a flexible workforce we need a buoyant PRS.

     
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    Osborne's triple attack on the PRS had little to do with helping FTBs to get on the ladder

     
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    Jo, let me put you right it’s not their home they are temporary occupants as per Contact which is the terms of the let. They are renting my Property not buying it that’s the legal basis for letting, are all Contracts to be scrapped and they placed with sitting Tenants that’s the difference it’s not theirs if they want their own property then buy it and can call it theirs. Virtually all London is now licensable HMO’s by any other name you like including families. So which of the Tenants have the right to stay indefinitely given they can come and go as they please but landlords will have no say, how does that work you could end up with one lame duck causing you problems for ever. No we’re letting on a Contract for a Contract period only. I never liked Periodic either that only happened in recent years it was the thin edge of the wedge leading to all this.

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    I agree, but for tenants to feel better they like to refer to their rental as a ‘Home’ 🏡. In the same way those who have a car 🚙 on PCP refer to anyone who asks that ‘ Yes that is my car’, in real terms it’s not, it’s owned by Capital Finance or Lloyds etc, they will NEVER own it, but I see it as simply a term used by those who have a temporary stewardship of an item…. It makes them feel better.

     
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    Simon -
    Interesting example with the car finance. It's pretty similar to a mortgage really.
    I basically feel that wherever someone's stuff is is home.
    When I was reluctantly forced to leave my last much loved home (due to an incoming Article 4 Directive effectively devaluing it if it didn't have the right to let as an HMO) I was amazed how in the space of a few days the new place felt like home. All it need was my possessions.
    When I rented a tiny apartment in France for a year while my holiday home was gutted after discovering dryrot it was amazing how the apartment felt perfectly fine purely because a small selection of my stuff was in it.

    So while the type of tenancy agreement is hugely important to landlords it probably isn't that important to good tenants. Very few good tenants are ever going to be evicted, just a very few good homeowners are ever going to have their house repossessed.

    Michael - London seems to operate in a completely different way to the rest of the country. It all seems very much them and us rather than a compatible coexistence between landlords and tenants.

    Basically as far as I'm concerned it's my house, their home.

     
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    @ Jo. Paul Young.

     
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    Very interesting comments form yourself, Simon and Jo. The point that we should focus on is that the Government should not be interfering as they are. The market place should be flexible so that it supports both views here. To me neither is right or wrong and neither is good or bad. It is down to the risk taker how they wish to operate.
    I will add that I can relate, very much, to Jo's comments.

     
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    I like my tenants to regard it as home. They tend to stay longer that way.

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    Annoyed. I don’t necessarily want to get rid of them either, I have had them 6, 12,17, 18 years that’s why my rents so low. At the same time I am not accepting them getting any ideas about it being theirs which is now what’s being pushed, they’ll want it law next.
    They have done very well out of me many went on to buy their own places. Some have even bought 2 houses because they were able to save while renting off me. Good luck with that in the future with Gove’s intervention, he’s even admitting now to think tank that the RRB has made things worse for Tenants, of course there can’t be any denying the evidence in your face.
    Incidentally I had 4 marriages from sharers that met in my properties but that’s dying out now since the Benefit took over from marriages, single parent families now ordered of the day, kept, rear and house them no wonder there’s a shortage of housing you can’t keep up with them. The guy just gets them pregnant and his responsibility ends there, sometimes there as a free loader as well, beats paying a Mortgage hands down.

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    Very good so the next time you rent a JCB remember it’s yours.
    There’s no equal partnership or compatible coexistence when the one with no skin in the game have all the rights and the potential to stay there for ever while the owner has no rights whatsoever except the right to buy the property and get a noose around his neck for half a million even for a 2 bed Flat in Action, then for good measure pay double Stamp Duty Land Tax for being so stupid to house others and be classed as a Criminal then pay thousands more to comply with licensing conditions + another £1500..00 license application fee every 5 years for Council to sub- let out this Computer exercise with their take on top.
    Yes that’s a very good analogy of where you’re stuff is where your home is, that’ll be in your suitcase like mine often was.
    I stayed in all kinds of gaffs the suitcase was my home.
    No there’s no partnership the Tenants have all the rights, the landlords have all the responsibility’s / financial commitments and class as a Criminal for providing good quality affordable housing.
    There’s a no bedroom Flat in Greenford, with no bed, no oven, 2 ring hob for £1150. pm, over Shops, unfurnished ideal come bring all your stuff & call it home.

  • David Saunders

    Eventually some way down the line, the then government will realise that there is not a snowballs chance in hell of owners of 2/3 bedroom flats in and around London that are worth minimum of £450,000 plus ever considering letting without the cast iron guarantee of regaining vacant possession when wanted that Section 21 gives/gave them.

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    I liked this article and I will be copying and pasting this article to my MP. I would urge all Landlord's on this forum to do the same.

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    I agree with Michael. Rental needs to be a contract with a term agreed at the outset and it can become periodic if both parties agree to it. LLs do not have a problem with this, as long as the tenants and LLs behave according to the contract, both have responsibilities. Yes, as Jo and Simon state it is their home and I always send a welcome email to my tenants to say it is their home etc. However, this all becomes sour if the tenants stop paying rent. There is always one or two who fall foul and do not respect the contract. RRB is just not a requirement and government needs to stop putting their dirty mitts out of the PRS and leave it as it is. The balance between tenants and landlords is based mutual agreement and respect for one another, so contract with a termination clause is essential part. A year's contract gives the tenants right to treat the rental as their home. However, they need to be aware that the house belongs to the LL and LL has a right to repossess it at the end of the contract or with 2 months notice if periodic for whatever reasons. As noted all LLs are different, some what t rent for 1 to 2 years, some are happy to rent out for a longer period. I have a mixture of both types of properties. Most of them in London are student lets, the rents are higher and the cost of maintenance and damages is very high. On of them is let to a charity for the last 7 years at low rent. However, mortgage costs have risen significantly and at the end of the contract, I wish to have it returned to me in 2026. However, if and when the RRB come into action, I am not sure whether I shall get the property returned to me. I wish to sell two properties outside London and use the proceeds after loan payments and taxes to reduce the London mortgages.

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