Residential property rents, which have been growing since 2010, are expected to rocket by 16% by 2018, according to a report from international real estate firm Knight Frank.
The firm points out that while the pace of growth in rents has been modest since 2012, growth is now spreading across the country.
Their report also points out that fears that the popular ‘Help to Buy’ scheme would have a major effect on rental demand has not been realised and Knight Frank believes that demand for rental properties will remain high.
Liam Bailey, the firm’s head of research, said that the ‘Help to Buy’ scheme may have an impact in some areas on demand for rental properties but it will not affect high demand in urban areas.
He added that from 2015 to 2016 the predicted rise in interest rates will affect affordability for home ownership and push up rents as demand increases.
Demand for rental properties to grow
Knight Frank believes that from 2016 the growth in rents will outstrip the growth in house prices to drive up yields and bring more landlords into the private rent sector.
The report reveals that the sector for private rented properties in the UK has doubled in 12 years and there are now around 5 million properties, or 17% of the UK’s housing.
If growth continues at the same pace, the number of rental properties will rise to six million by 2017.
One of the biggest changes being highlighted by the Knight Frank report is that the sector will develop over five years and will increasingly build large units specifically for people to rent.
Mr Bailey added: “Backed by major investors, these new rental blocks will be similar to the modern purpose-built accommodation units for students that are being built.”
These rental blocks will come complete with facilities to attract tenants and help boost the rental market to meet demand and underline its position as a big part of the country’s housing stock.
Rental properties in London
Unlike many recent reports on the state of the rental situation, Knight Frank says that prime rents in central London have been underperforming when compared to rents nationally. They say there has been a decline of 1.7% in the year to October.
This has been led by the weak financial sector but they are predicting a modest rise for rents in prime central locations in London next year.
This prediction is in stark contrast to a recent survey undertaken by Move With Us which found that the cost of rent in London is, on average, more than 200% greater than the rest of the UK. They also found that the average cost of a rent increase by £7 in October 2013, a rise of 0.75%
