UK rents to outstrip house prices: Savills

UK rents will rise significantly more than house prices over the next five years, according to research by Savills.

The rise is pushed by rising demand from those unable to buy their own homes and those reluctant to commit in the current market.

“Competition among renters will drive rents higher, with growth in mainstream rents forecast to rise by 20.5% by the end of 2016. This growth significantly outpaces house price growth, which is expected to total just 6% over the same five years,” the report found.

“This differential in capital value growth and rental value growth will push out yields and will be the catalyst for renewed investment activity in the sector by corporates and institutions looking for income rather than individuals looking for capital growth,” says Yolande Barnes, director of Savills residential research.

Median gross yield on residential stock will rise from 5.4% to 6.1% across the five-year period according to the report, and in areas of low owner-occupier demand yields could average as much as 9% by 2016.

In London, capital prices will continue to grow and this growth will remain the major draw for investors.