JLL is forecasting that average rents across the UK will rise by 4.5 per cent next year, followed by a 4.0 per cent rise in 2017, another 3.5 per cent in each of the following two years, and by a more moderate 3.0 per cent in 2020.
“Despite believing that demand will increase and available supply will remain constrained, we anticipate only moderate positive rental growth on a national basis over the next five years” says Adam Challis, JLL’s head of residential research.
“The main limiters are that tenants will move to smaller properties or to cheaper areas in order to ensure their rental costs suit their financial aspirations” he says.
His team’s research suggests that already almost half of all 25 to 34 year olds privately rent, with that proportion likely to rise further.
JLL says that while the vast majority of British buy to let landlords are higher-rate tax payers - so will be “significantly” affected by the recently proposed tax changes within the private rental sector - as some 65 per cent of buy to let properties are owned outright, there is not expected to be any significant exodus of landlords from the industry.
“However, there may be slightly less exuberant enthusiasm from new investors, which may have a longer-term impact on rental supply” says Challis.
He says that the big potential growth area within the sector is Build To Let - the growth of institution investors in purpose-built and professionally-managed blocks. However, Challis believes this part of the private rental landscape “will always be dwarfed in volume terms by private landlords” although it may succeed in driving up accommodation standards.