According to Savills, rents in the UK are expected to rise by 18% by 2029, exceeding average income growth of 15%. This increase is being driven by increasing tenant demand and a limited supply of rental properties, as many landlords exit the market owing to rising mortgage rates, regulatory reforms, and tax pressures. Proposed energy efficiency requirements requiring rental homes to have an Energy Performance Certificate rating of C or higher by 2030 could further decrease supply. The disparity between demand and availability is projected to exacerbate financial issues for tenants, particularly in London, where housing expenses already take a considerable portion of income.
The UK rental market is projected to face significant challenges over the next five years, with rents expected to rise by nearly 18% by 2029, according to a report by Savills. This increase is set to exceed the predicted 15% growth in average incomes during the same period, further straining affordability for tenants. The situation is particularly severe in London, where renters already allocate close to half of their monthly income to housing.
The rental market's supply-demand imbalance is a significant contributor to this growth. The Royal Institution of Chartered Surveyors (RICS) reports that tenant demand is continually high, but the quantity of available rental units is decreasing. This imbalance has been exacerbated by landlords leaving the market due to rising mortgage rates, shifting rules, and tax changes.
According to Zoopla data, roughly one-third of homes currently listed for sale were previously rental properties, indicating a substantial shift in landlord behavior over the last four years. Many property owners are preferring to sell rather than deal with the growing financial and regulatory challenges of keeping rental properties.
The looming introduction of government regulations requiring all rental properties to achieve an Energy Performance Certificate (EPC) rating of C or higher by 2030 is adding to these pressures. Upgrading properties to meet these energy efficiency standards can be costly, leading some landlords to opt for selling their properties instead of making the required investments. This trend is expected to further reduce the supply of rental homes, contributing to an additional rise in rents.
Experts worry that this scenario might have a greater impact on the housing market. The limited quantity of rental houses may result in overcrowding and increased competition among tenants, especially in urban regions where housing demand is already strong. Furthermore, first-time buyers, who frequently rely on the rental market before becoming homeowners, may find it more difficult to save for deposits when rents rise. With demand exceeding supply and regulatory pressures increasing, rental costs are anticipated to outpace income growth significantly. For many tenants, this could mean continued financial struggle and fewer housing options.
Addressing this issue will require concerted efforts from policymakers and stakeholders in the housing sector. Strategies such as incentivising landlords to remain in the market, increasing the construction of affordable rental housing, and offering financial assistance for energy efficiency upgrades could help stabilise the rental market. However, these measures will need to be implemented promptly to counter the escalating challenges.
Advertisement
Facebook
Whatsapp
