Rental value growth is predicted to outpace property price growth over the next five years, says one leading property expert.
Nicky Stevenson, the managing director of Fine & Country UK, says that a shortage of stock, increased borrowing costs, and economic pressures are underpinning the market.
She said: “Rental records continue to topple month-on-month across England and Wales.
“The upward price trajectory continues as the gap between supply and demand shows little sign of easing.”
‘Rental threshold of a prime market property’
Ms Stevenson added: “The rental threshold of a prime market property across England and Wales now stands at £2,750, with the average prime rent at £3,661 per month.
“In both the main and prime markets, value growth in London is most marked.”
The average rent for a prime property in London has now reached £5,000, Ms Stevenson says, which is close to £200 per week higher than it was a year ago.
She also highlights that apartment living is popular again in many city centre locations and this is underpinned by news from Rightmove which reports a significant uptick in demand for smaller apartments, with studio flats overtaking one-bed properties as the most in-demand apartment for renters.
More than 4m households live in private rented accommodation
Ms Stevenson also notes that more than four million households live in private rented accommodation, the majority in homes owned by private landlords.
And, according to the British Property Federation, institutionally owned, professionally managed, build-to-rent properties are set to account for more than 8% of private rented households by 2032.
Ms Stevenson said: “Many landlords are unaware of this sector.
“HomeLet survey data suggests just 48% of professional landlords have heard of build-to-rent, falling to less than 1 in 5 of accidental landlords.
“The number of build-to-rent homes is forecast to increase five-fold over the next decade, from 76,800 homes today to 380,000 in 2032.”
She added: “Although the sector has traditionally focused on London and major regional cities, close to half of all local authorities now have build-to-rent in their housing pipelines, over double the proportion in 2017.”
Marked slowdown in annual price growth
Speaking about property prices, Ms Stevenson notes that Nationwide report a marked slowdown in annual price growth to 7.2% in October, compared to 9.5% in September, with a month-on-month price fall of 0.9%.
This is the first monthly fall since June 2021 and the most significant correction since June 2020.
Across the prime markets of England and Wales annual property price growth is currently 8.8%, and the average price of a prime property in southern areas is in excess of £1 million.
She said: “While many forecasters are predicting price corrections in the market, this needs to be considered in the context of the unsustainable growth in the market since 2020.
“Correct market pricing by agents is critical as the leeway between marketing price and ‘real’ price becomes more apparent.”
‘Price differentials are a better way to consider a market’
Ms Stevenson added: “Price differentials are perhaps, a better way to consider a market.
“A 10% fall on a property priced £500,000 equates to £50,000, a similar fall in a property priced £1 million is £100,000.
“Given the substantial price rises seen in the market over the past two years, there is only a low risk of negative equity for the vast majority of purchasers.”