Rents forecast to rise 12% as PRS steadies

Private rents in the UK are set to climb by 12% over the next five years as the rental market shifts towards calmer, more predictable conditions, research reveals.

According to a forecast from Savills, tenant affordability will slowly improve during that time, helped by steady income growth and a gradual cooling in demand that has defined recent years.

The property firm’s analysis shows that renters spent on average 32.4% of their gross household income on rent in 2025, compared with 30.4% five years earlier.

RRA might cause disruption

The firm’s director of research, Emily Williams, said: “The private rented sector has been uncharacteristically turbulent over the past few years.

“Rental growth at a macro-level is typically very closely linked to income growth, but that trend has been turned on its head in recent years, with growth peaking at 12% in the year to August 2022.”

She added that tenants spending a third (32.4%) of their gross household income on rent ‘marks the largest worsening in rental affordability’ since 2006.

Ms Williams continued: “However, as demand levels start to settle, our forecast indicates that conditions over the next five years are expected to return to more normal levels, with rents increasing at a rate between inflation and income growth.

“Any significant disruption to supply caused by the Renters’ Rights Act and other regulation of the market is the key risk to this outlook.”

BTL landlords sold up

Savills attributes much of the shortfall in supply to tax changes, rising interest rates and a growing list of regulatory reforms.

These changes have pushed some buy to let investors to sell up.

The report also warns that Build to Rent projects, though growing, are not enough to bridge the supply gap.

With around 15,000 new completions a year against nearly 5 million rented households nationwide, the imbalance is stark.

Tenant demand will fall

Tenant demand, meanwhile, surged to record levels between 2021 and 2023.

Savills points to RICS data showing an unprecedented rise in demand following the pandemic and a spike in net migration.

That added 600,000 households in just five years — a 10% increase in the size of the private rented sector within two years.

The company expects that wave to subside and demand should move back toward the steadier levels seen in the 2010s.

One reason for that is more first-time buyers entering the housing market thanks to relaxed lending rules and cooling migration.