With the combined knowledge of decades of expertise in the UK rental market, and with a wealth of information at our fingertips, Grace Miller & Co have made the following article as a predictive set of ideas for the outlook of the UK rental market. As with any predictions, things change and we must understand that some of these predictions will not come to fruition.
Overview.
The UK rental marketing is set for significant changes over the next decade, with factors such as government housebuilding policies, demographic shifts, rising mortgage costs, and rental stock trends shaping the landscape. For landlords, understanding these trends is crucial when deciding whether to stay in the market or sell up. In this article, we explore the key predictions for the rental market between now and approximately 2035, with a soft focus on London compared to the rest of the UK.
Our predictions at a glance:
- Rental demand will remain strong:
Due to a growing population, immigration, and affordability challenges in homeownership. - Housebuilding targets are unlikely to be met:
Meaning rental supply will remain tight, especially in London. - Mortgage costs and the cost of living continue to sting:
High costs and affordability mean a sustained demand for rental properties. - Landlords who stay in the market stand to benefit from rising rents:
However, they will need to navigate increased regulation and potential tax changes.
Prediction #1: Housing Supply Will Remain Constrained.
The government has set ambitious housebuilding targets – 1.5 million new homes over five years – but delivery is falling well short. In the 12-months leading to November 2023, only 212,000 new homes were built, significantly below the required 300,000+ per year. Planning reforms may help in the long term, but in the short term, the lack of new homes will keep rental demand high.
London vs The Rest of the UK
London faces even greater housing shortages due to planning constraints and high development costs. The Mayor’s London Plan aims for 52,000 new homes annually, but actual completions are consistently below target. This continued undersupply will likely keep rental prices high.
Prediction #2: Strong Rental Demand Due to Demographic Shifts and Affordability
The UK’s population is set to grow by nearly 5 million over the next decade, largely due to immigration. Most new arrivals rent, with London being the first choice for many. Additionally, the number of renters aged 65+ is expected to double by 2030, adding to rental demand.
The Homeownership Affordability Gap
With rising mortgage rates and higher deposit requirements, fewer first-time buyers can afford to step onto the property ladder. This trend means that younger generations will rent for longer, maintaining strong demand for rental properties well into the 2030s.
Prediction #3: Rising Mortgage Costs Will Keep People Renting
The cost of homeownership has surged due to rising interest rates. The Bank of England’s base rate hikes have pushed mortgage rates to 5-6%, making it just as expensive (or more expensive) to own a home as to rent in many regions. In fact, in 2023, renting was cheaper than owning in nine out of 12 UK regions.
For landlords, this means:
- Strong rental demand as fewer people can afford to buy.
- Increased ability to raise rents to offset rising operational costs.
- A higher number of long-term renters in the market.
Prediction #4: The Inheritance Boom Will Impact the Rental Market
The next decade will see an unprecedented transfer of housing wealth as baby boomers pass on their properties. While some inheritors will sell homes, others will rent them out, adding to the private rental sector. However, many younger people will still have to wait until middle age to inherit a home, prolonging their time as renters.
Prediction #5. The Rental Stock is Shrinking – A Win for Landlords Who Stay
Since 2019, the UK has lost over 160,000 rental properties due to landlords selling up, driven by tax changes, regulatory pressures, and higher mortgage costs. The government’s Renters’ Reform Bill, set to introduce measures like the end of Section 21 “no-fault” evictions, may push even more landlords to exit the market.
Why This Benefits Landlords Who Stay
With fewer properties available, those who hold onto their rental investments will likely see:
- Higher rental yields as supply tightens.
- Lower vacancy rates due to high tenant demand.
- More bargaining power when setting rental terms and prices.
Conclusion: Should Landlords Stay or Sell?
Despite challenges such as rising costs and increased regulation, landlords who stay in the market are likely to see strong returns over the next decade. With high demand, limited supply, and a growing renter population, rental prices are expected to continue rising.
For those considering selling, it may be worth holding onto properties for the longer term to benefit from increasing rents and tenant demand. While some regulations may pose challenges, the fundamentals of the market remain in favour of landlords who are willing to adapt.
Ultimately, if you can afford to sustain your rental property costs in the short term, you are still in line for strong, longer term gains.
If you would like to learn more about the future of the rental market and get some free, no obligation advice. Contact Grace Miller & Co today, we would love to speak to you.
