JLL forecasts a 17% rent rise over the next five years

Despite a rapid rise in rents over the past three years, real estate firm JLL is forecasting that rents will increase by 17% over the next five years.

Its latest ‘Residential Forecast 2025-2029’ shows that while UK rents surged by 27% in the five years to September 2024, the current supply-demand imbalance is gradually easing.

London is projected to see a significant 18% increase in rents over the same period.

JLL is also predicting that more landlords will leave the PRS than enter because of the 5% surcharge on additional homes.

In the housing market, JLL anticipates a 20% rise in house prices over the next five years, driven by lower mortgage rates attracting buyers back to the market.

BTL landlords will leave the market

In the report, JLL states: “The supply demand imbalance which has in part driven rent rises (wage growth and inflation also contributed) is now becoming more balanced, but a lack of new stock entering the market means we anticipate rental growth will exceed wage growth and inflation over the next five years.

“The October Budget did little to change our view.”

It goes on: “Capital Gains Tax for residential property remained the same, meaning exit costs didn’t rise, but entry costs did.

“Landlords looking to purchase homes now have to pay an additional 2% stamp duty over the previous already elevated bill.

“We expect this will mean more traditional buy to let landlords leave the market than enter over the next five years.”

Factors influencing the rental market

JLL is also highlighting these key factors influencing the rental market:

• EPC C by 2030: The impending energy efficiency standards could lead to landlords offloading less efficient properties or removing them from the market for retrofitting, potentially driving up rents
• Renters’ Rights Bill: While the Bill may limit excessive rent increases, it could also prompt some landlords to exit the market, especially if the courts become overwhelmed with cases
• Government incentives: The absence of significant buyer incentives in the recent budget may impact demand, particularly for first-time buyers. However, future policy changes could influence market activity
• Mortgage rates: A more rapid decline in mortgage rates could accelerate growth in higher-value markets
• Housebuilding: While the government aims to increase housing supply, actual construction levels may lag targets, contributing to ongoing stock shortages.