Rents predicted to grow more than house prices

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Estate agent Savills has predicted that rents will grow, whilst house prices could fall over the coming few years, MortgageStrategy.co.uk reported in November 2016.

Savills blames the economic uncertainty during the negotiations to leave the European Union. Continuing low interest rates are another contributing factor.

Savills forecasts that buy-to-let investments will slow down, and blames what it sees as attacks on landlords by the former chancellor George Osborne, who increased stamp duty and reduced tax relief for landlords. As fewer properties will be available to fulfil a growing demand for rental accommodation, rents will rise, while house prices could fall by as much as 16% over the two years, according to Savills.

The firm predicts that London rents could increase by 25% over the next five years. The average rent in the rest of the country could rise by 19%.

Lucian Cook of Savills admits that accurate forecasting is difficult, saying:

“There is no precedent for the current market and the Brexit vote makes forecasting more challenging than perhaps ever before.”

He added that the housing market clearly reacts unfavourably to political and economic uncertainty.

Though Savills predicts a downturn in buy-to-let property sales, the market remains buoyant. HMRC recently reported that a quarter of all properties sold in the summer quarter of 2016 were purchased for buy-to-let or second homes, says an October 2016 This Is Money article.

Interest rates on commercial mortgages for buy-to-let investments are at low levels as landlords continue to purchase properties.

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