Rising residential rents are to show no signs of abating, according to research from Knight Frank.
The report has highlighted that UK earning growth will create more room for rental inflation into the new year and beyond.
Indeed, rents are expected to increase by 16 per cent by 2018, this will no doubt come as pleasing news to those seeking landlord insurance.
Some feared that the governments Help to Buy scheme could potentially have a negative effect on the rental market. However, it seems that the sector will continue to prosper, particularly in urban areas.
Liam Bailey, global head of residential research said: “Rising interest rates will put some further upward pressure on rents from 2015-16, as affordability levels for homeownership are eroded.
“Our view is that rental growth from 2016 may start to outpace house price growth, driving yields, and attracting additional buy-to-let investment.”
Development is likely to occur in the sector in the next five years as more areas look to introduce specifically designed rental blocks, which will be backed by institutional investment.
Indeed, development has already happened in some form, with the report revealing that the UK private rental sector has doubled since 2001. Around 17 per cent of housing stock is made now up by rented accommodation in the country.
The report suggests that rents across the UK will see a steady rise of 2 per in 2014. For London this means that the drop of 2013 will be reversed in the new year.
“The weakness of the financial sector in 2011 and 2012 has been the main cause of this downward movement of rents.
“Our view is that rents will begin to rise modestly in prime central London in 2014, as renewed job creation an optimism, especially in the City, creates increased demand from tenants.,” said Bailey on the London market.
Knight Frank’s report will no doubt give landlords a sense of optimism as the rental sector shows signs of steady positive growth for the next five years.