Knight Frank Revises Growth Forecast - UK rents to increase 23.9%
Published by Magnate Assets on
Oct 4, 2023
In a recent update, Knight Frank, a renowned lettings agency and property consultancy, has revised its rental growth predictions for prime London properties. The agency expects rental prices to soar beyond initial estimates due to a persistent supply-demand imbalance. This unexpected rental price surge creates a favourable environment for investors to consider UK real estate.
One of the primary reasons behind this rental growth is the prolonged imbalance between supply and demand. Contrary to earlier expectations, this issue is taking longer to resolve. Knight Frank points to two significant factors contributing to this trend: the mounting tax burden on landlords and increased regulatory red tape, which have led more landlords to exit the property market.
Interestingly, the situation is gradually improving in London's prime markets. Some property owners, uncertain about the trajectory of property prices, have opted to let out their properties, contributing to a more balanced supply-demand equation. Nevertheless, Knight Frank still anticipates substantial rental growth in prime areas, with a projected 23.9% increase in rental values in Prime Central London by 2027 and a 23.3% rise in Prime Outer London.
Across the entire UK, the rental market has been grappling with similar supply-demand challenges. According to the Office for National Statistics (ONS), annual rental growth stood at a remarkable 5.5% in August, marking the highest rate on record. The agency attributes this surge to various factors, including the robust labour market and job creation. Higher mortgage rates also play a role in keeping prospective buyers in the rental sector.
National data reveals a 25% decline in leveraged first-time buyer numbers in 2023 compared to pre-pandemic levels. Additionally, data from Rightmove indicates that rental listings are now more than 50% lower than the 2017-19 average. These statistics underline the persistent supply-demand gap in the rental market, with no signs of reversal.
Knight Frank has issued a warning in light of these trends, stating, "We expect rental prices to continue to increase over the upcoming three months and have revised up our rental growth forecasts for 2023 to 6.5%, with a further 5.0% growth forecast in 2024."
For investors seeking opportunities in the UK property market, these revised forecasts present a compelling reason to consider property investment. With rental prices expected to rise significantly in the coming years, investing in UK real estate could be lucrative, especially in prime London locations. The persistent supply-demand imbalance and the various factors driving demand for rental properties make this an opportune time for those looking to capitalise on the rental market's growth potential.