Buy To Let rental growth to lag behind Build To Rent - claim

The current supply demand imbalance across the UK rental market looks set to endure as fewer households move across into owner occupation and demand for rental properties increases further. 

That’s the view of property consultancy JLL, which has issued its forecast for the 2023 lettings and sales markets and beyond, right up to and including 2027.

On rentals it says: “We expect that prospective buyers, as well as those who would under normal circumstances have transacted under Help to Buy, will remain in the rental market. This adds further fuel to an already constrained rental market and will, we expect, mean the supply demand imbalance and resulting rental growth will continue. 

“Rental growth is expected to be particularly strong at the front end of the five-year period before falling back in line with historic norms of circa two to three pr cent as inflation is brought back under control.”

The consultancy says the outlook for investors is mixed. 

And it adds: “Demand for rental properties looks set to continue, and forecasts of rising rents and falling prices suggest we could see a rise in yields across the board. But the cost to service debt will remain a key issue for more highly indebted landlords. The purpose-built UK Build To Rent sector is expected to outperform the wider UK rental market in terms of rental value growth.”

On the sales side JLL is warning of a correction in prices, but not a crash. 

It says the significant majority of existing home owners with mortgages should be able to ride out current and expected rate rises, while noting that banks have a low appetite for repossessions and while they cannot turn a blind eye to customers defaulting, they now have a suite of options to help struggling mortgage payers compared with previous financial crises.

The consultancy concludes:  “Against this backdrop, JLL is forecasting that UK house prices will fall in value in 2023 by six per cent which equates to an average discount of £17,500 from the average UK house price of circa £290,000 … On a regional level JLL’s forecasts falls ranging from circa four per cent across Greater London to around per cent in Wales, the North East and Yorkshire and the Humber.”

But it warns that transactions will fall sharply, saying: “JLL predicts there will now be circa 200,000 viable first time buyers with sentiment among aspiring homeowners taking a hit, mortgage affordability becoming stretched to new homeowners and the ending of Help to Buy, which typically helped 50,000 FTBs onto the ladder per annum. This cocktail of transactional headwinds will see overall transactions fall to circa 1m in 2023.”