Property Blog and News / Rental market: What will happen in 2018?

Rental market: What will happen in 2018?

Read our expert guide to find out what’s in store for tenants.

If UK property prices stagnated in 2017, the same broadly applied to the rental sector, with little dramatic movement in rental values.

According to the Office for National Statistics (ONS) rents in the private rented sector rose by 1.6 per cent in the year to August. The area where they rose fastest – by 2.8 per cent – was the East Midlands, incorporating Nottingham, Leicester and Derby.

In central London, despite the shortage of supply in relation to demand, rents have fallen by around three per cent in the past 12 months which mirrors the similar fall in property values.

There are plenty of variables to take into account when considering the outlook for 2018, both political and economic. Here, leading experts from across the property sector share their thoughts on what will happen to UK rents over the year ahead.

  • Knight Frank predicts that rental values in the UK will rise by 1.2 per cent in 2018 but fall by 0.7 per cent in London with outer London seeing higher falls than central London. “Rental value declines are bottoming out as the rate of new supply slows down,” says Tom Bill, Head of London Residential Research at Knight Frank.
  • In a survey conducted by ARLA Propertymark (formerly the Association of Residential Letting Agents) 59 per cent of lettings agents say that they expect rents to rise in 2018 compared with just 19 per cent who expect them to fall.
  • Savills is expecting the number of mortgaged investment purchases to fall by 27 per cent in the next five years and to be 10,000 in real terms in 2018.
  • Savills is also forecasting that rents will grow faster than house sale prices in London for the first time since 2011 and that over the next five years they will rise by 17 per cent.
  • Real estate firm JLL is predicting rental growth of two per cent per annum in both 2018 and 2019. Experts also believe that, because of high prices in the sales market, the rental market will continue to expand and prove more robust than expected over the next five years.
  • Strutt & Parker is predicting that, in prime central London, lettings price growth will outperform sales over the course of the year. “The proportion of households in the rental sector is growing, and our research shows an increasing preference for long-term letting,” says Kate Eales, Head of National Lettings at Strutt & Parker.
  • A survey by the Royal Institution of Chartered Surveyors (RICS) has revealed that, following policy changes such as increases in stamp duty, more landlords are expected to leave than join the market in 2018. RICS members believe that, in consequence, rents are likely to rise by three per cent a year for the next five years, outstripping rises in house prices.
  • In the latest National Rent Review by buy-to-let specialists Landbay, CEO John Goodall predicts that “rents in the areas outside London will rise as we head into 2018, particularly across the eastern region of the UK”, and that there will also be “greater tenant interest in the London commuter counties,” with the capital becoming increasingly unaffordable.
  • The lettings fees ban – announced by the government in 2016 – could come into effect in 2018 but it has been criticised by commentators who say the ban could lead to increased rents for tenants of up to £255 per year. However, others disagree and housing charity Shelter has welcomed the step.
  • Taking the various expert forecasts, there seems to be an expectation that rises in rents during 2018 are likely to exceed rises in house sale prices. This is better news for landlords than tenants, particularly at a time of rising inflation. But the rises are not predicted to be substantial, and in the current market, not all landlords are going to raise their rents, particularly if they have reliable tenants.

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