Forecasts Predict Substantial Rent Increase Between Now and 2027
UK rents may surge by 22.2% over the next five years, according to a report by Knight Frank.
High demand shows no sign of coming down. In addition, the labour market and new jobs are also influencing rent prices moving forward.
Read on to see how this will affect the housing market and property investors in 2023 and beyond.
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Why Are UK Rent Prices Higher in 2023?
UK rent prices are increasing faster than property prices in 2023. Numerous factors affect rental costs. This includes a shortage of rental supply and the decline in first-time buyers due to the current cost-of-living crisis. As such, the UK saw rental prices increase by 5.5% – a new record.
Knight Frank indicated that the “strength of the labour market and job creation” also pushes up prices and boosts rental demand in the property sector.
As things stand, the current annual record looks set to be broken by the end of 2023.
Let’s have a look at the forecast.
|Rental Growth (%)||6.50%||5%||3.50%||3%||2.50%|
Rental growth is expected to slow as interest rates and inflation fall to manageable levels. However, they still result in a 22.2% cumulative total, making good reading for those looking to make money from property and wondering whether they can count on the market in the coming years.
Take a look at our Property Investment for Beginners guide for a more detailed breakdown of UK property over the next few years.
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UK Rents Still More Affordable in Northern Regions
UK rents are changing dramatically. Recent data shows the average rental cost for a single room in London is over £1,000. Knight Frank’s predictions suggest these rates will only increase across the country.
While landlords stand to profit from increased rents, many people will look outside of the capital for less expensive places to live. As such, the best real estate investments may lie with alternative locations with excellent regeneration potential – not to mention cheaper properties.
The Homelet Rental Index points to the North as having cheaper places to rent. For instance, the average rental cost sits at £1,276. However, the North West has an average price of £1,006.
Liverpool and Manchester are some of the most desirable places to live in the North West. Both cities offer excellent value-for-money properties. Liverpool’s average rent sits at £1,058, while property prices are £177,224. These figures give an average rental yield of 7.16%. However, some areas in the city offer even higher yields.
North West cities like Liverpool and Manchester also have many regeneration plans in the pipeline.
For instance, apartments for sale in Liverpool have seen a massive influx in investment in recent years, with areas like the Baltic Market voted one of the “coolest places to live” in the UK.
With rents set to go up over the next few years, tenants and landlords keep an eye on good-value buy-to-let investment properties across the UK.