Rents could surge more than 22% over the next five years

New data from Knight Frank has revealed that UK rents could surge by 22% in costs over the next five years. This comes as UK rental prices rose by a record 5.5% in August alone.

In light of this news, David Hannah, Group Chairman of Cornerstone Tax – the UK’s leading property tax experts – discusses the current state of the rental market.

Knight Frank’s findings come as it expects UK rents to increase on an annual basis by 6.5% by the end of 2023. It expects this to be followed by a 5% hike over the course of 2024, then 3.5%, 3%, and 2.5% in the following years, resulting in a cumulative total of 22.2%.

Prime central London is expected to see even steeper rent rises in the five-year outlook. By the end of 2023, the report predicts a record-high 8% surge in rental values, leading to an eventual cumulative total of 23.9% over the next five years. This is almost mirrored by prime outer London, where overall growth of 23.3% is expected by 2027.

This predicted rise in rents comes as an exodus of landlords from the rental market continues. Data from Cornerstone Tax shows that 23% of London landlords say they entered the market without sufficient knowledge and have lost thousands as a result.

Hannah points out that the reason for the increase in rent costs is due to landlords who have been affected by the increase in UK interest rates over the last 20 months. They have responded by raising rents paid by tenants where they can.

David Hannah, Group Chairman at Cornerstone Tax said, “The fact that there could be a 22% surge in rental prices over the next five years is very concerning, especially given that there is already an affordability crisis at the current price levels. The cost of renting currently means that millions across the country are left with the idea of homeownership seeming like a distant dream.

“This issue is being driven both by rising interest rates, meaning that landlords’ costs are going up, and also a crisis in terms of the undersupply of rental properties. Our proprietary research shows that amidst the current climate, just 1-in-5 buy-to-let landlords say their investment has been a profitable one, highlighting why there is an exodus of landlords currently leaving the market.”