Private rental prices will rise by almost 20% over the next five years as demand continues to outstrip supply

Renters in Britain can expect their bills to rise by almost a fifth over the next five years as demand continues to outstrip supply, says estate agent Savills.

Tenants will pay 17.6 percent more in 2029, while rents are expected to rise 4 percent in 2025.

A tight private rental stock is likely to be overwhelmed by demand in coming years as beleaguered landlords avoid the market due to higher mortgage costs, more red tape and changes to stamp duty rates for second homes.

This decline will continue to reduce the availability of private rental housing, causing monthly rental prices to rise.

Renter demand has declined from the record highs of 2021 and 2022, but is still at high levels.

The latest figures show that the number of available rental properties per rental sector fell by 16 percent in September compared to 2018-2019 levels, with rental income rising 20 percent faster so far this year.

Landlords have increasingly left the market in recent years due to tightened legislation and sky-high mortgage costs, making investments unsustainable.

Estate agents fear more landlords will stop investing after Chancellor Rachel Reeves’ second stamp duty in the Budget.

Guy Whittaker, associate director at Savills, said: ‘The increase in the stamp duty land tax surcharge for second homes is likely to dampen demand from new buy-to-let investors, and it will deter some existing landlords from expanding their portfolios.

‘The potential requirement to improve energy performance ratings by 2030 could lead some to leave the sector altogether, especially in markets where the upgrades required would exceed an entire year’s rental income. In those cases it may make more sense to sell.’

However, according to Savills, rental growth could slow in some markets as an ‘affordability ceiling’ has been reached. In London, tenants will spend no less than 43 percent of their income on rent in 2023.

Supply: The latest figures show that the number of available rental properties per rental sector fell by 16% in September compared to 2018-2019 levels

But rents in the capital rose by just 1.5 per cent in the 12 months to September 2024, compared to 4 per cent nationwide, as affordability came under pressure.

Mr Whittaker says slow growth in London has led to some relief in affordability pressures and Savills predicts 2.5 per cent growth in rents in the capital next year.

Slightly stronger rental growth of 3 percent is expected by the end of the forecast period in 2028 and 2029.

But the capital’s growth in the five years to 2029 is expected to be just 14.2 percent – 3.4 percentage points lower than expected growth across the country.

Levans@dailymail.co.uk