icon London icon
  • UK
  • >
  • London
  • >
  • >
  • Rents are set to rise by a quarter across the UK over the next four years!
Rents are set to rise by a quarter across the UK over the next four years!
Sep 15, 2023
Rents are set to rise by a quarter across the UK over the next four years! London
By   JadeSolicitor
  • City News
  • Rental Trends
  • UK Housing Market
  • UK Rentals
Abstract: Rents across the UK are set to rise by a quarter over the next four years, far outpacing house price growth, according to expert forecasts.

According to Hamptons Estate Agents, rising interest rates will continue to put pressure on landlords holding mortgages, forcing many to choose to sell or pass on losses to tenants. Meanwhile, a chronic shortage of supply will push rents up further.

This means that average rents in the UK are expected to grow by 25 per cent to almost £1,600 a month by the end of 2026, while house prices will grow more modestly at just 5.5 per cent. Rents are expected to grow by 8 per cent this year, 7 per cent in 2024 and 5 per cent in 2025 and 2026 respectively, according to estate agents.

Growth in London is expected to be similar to elsewhere overall, but slightly higher in the first and second years and slower in the third and fourth years.

It is well known that UK rents are rising at the fastest annual rate of increase since 2016. This comes after the Bank of England has raised interest rates eight times in the past year in an attempt to curb inflation.

Investors are now predicting that at their meeting on 21 September, the policymakers who set interest rates will raise the benchmark rate again, from the current 5.25% to 5.5%. However, they are split on whether rates will be raised further after that, with some predicting they could reach 5.75 per cent by the end of 2023, while others predict it could be as high as 6.5 per cent.

Rising rates have already pushed up mortgage rates for borrowers, who have to take on higher monthly repayments when negotiating new deals with their banks.

Aneisha Beveridge, head of research at Hamptons, says: "There is a popular argument that the Bank of England's efforts to curb inflation have hit the rental sector harder than any other part of the property market. The build-up of long-term supply issues, coupled with soaring landlord costs, is putting upward pressure on rents."

"And it's hard to see these pressures easing any time soon, which is why we expect rents to continue to rise over the next few years."

Rents are set to rise by a quarter across the UK over the next four years!

However, the research suggests that the impact of rising interest rates on rents appears to be much more pronounced than on house prices so far. The estate agent predicts that UK house prices will fall by 2.5 per cent this year, stay the same in 2024, grow by three per cent in 2025 and five per cent in 2026.

"While rising interest rates and the cost of living have caught many households off guard, it's becoming increasingly clear that the house price crash that some forecasters expected hasn't happened," Aneisha Beveridge added. "Instead, we expect a small price drop in 2023, followed by a slower recovery over the next few years as most households adjust to an era of higher interest rates."

This is more like "the U-shaped recession of the early 1990s than the V-shaped crash and rapid recovery of 2008," she said. She noted that real home price declines over the next four years will be higher than the declines shown in nominal prices because prices will not keep pace with inflation. Taking inflation into account, house prices are expected to fall by almost 10 per cent from the beginning of 2023 to the end of 2024. Overall, in real terms, UK house prices are expected to fall by 5 per cent over four years.

A "U-shaped recession" is an economic term used to describe a pattern in which economic activity falls, stays low for an extended period of time and then grows again. It is shaped like the letter "U". This is different from a "V-shaped recession", in which the economy declines sharply for a short period of time but recovers quickly, forming a steeper "V" shape.

During this period, many countries, particularly the UK, experienced a recession. This recession was characterised by a relatively long period of low activity followed by a gradual recovery. This contrasts with the rapid recovery from the 2008 global financial crisis, which was more of a 'V-shaped recession'.

The U-shaped recession of the early 1990s occurred in many countries, but was particularly pronounced in the UK, which also faced high unemployment and a depressed property market. This pattern of recession meant that the economy was slow to recover and had a long-term negative impact on many people and businesses.

icon icon