Savills Forecasts Rental Market Stabilisation: What London Landlords Need to Know Now

Understanding the Forecast: 12% Rental Growth Over Five Years

Savills’ recent five-year forecast for the UK private rental market indicates a stabilisation in tenant demand and a moderate rental growth of approximately 12%. This growth is expected to more closely align with general income growth and inflation rates, a positive shift from recent sharp rental increases driven by surging demand and affordability pressures.

For London landlords, this forecast suggests the market will transition from a high-pressure environment to a more balanced one. However, it is important to note that the forecast assumes current economic conditions and policy frameworks remain relatively stable.

Why This Matters: The Impact of Market Stabilisation

The easing of rental affordability challenges and tenant demand surges means landlords are less likely to see rapid year-on-year rental increases. This stabilisation can reduce income volatility but also limits the potential for above-inflation rent hikes.

At the same time, the private rental market faces ongoing supply constraints, partly due to some landlords exiting the sector. These exits are driven by increased regulation and profitability pressures, particularly linked to the new Renters' Rights Act, which introduces significant compliance obligations and tenant protections.

Navigating the Renters' Rights Act

The Renters' Rights Act introduces reforms that strengthen tenant rights and impose stricter landlord obligations. Key changes include:

• Enhanced eviction protections and longer notice periods
• Stricter deposit handling and dispute resolution processes
• New standards for property condition and maintenance

For landlords, this means adapting compliance strategies to avoid legal penalties and maintain good tenant relationships. Failure to comply could result in increased void periods and legal costs, impacting profitability.

Single-unit landlords and accidental landlords—those who own property not primarily as an investment—may find these changes particularly challenging due to limited resources for compliance management.

Practical Steps for Landlords

1. Review Compliance Frameworks: Immediately audit tenancy agreements, deposit protection procedures, and maintenance schedules to ensure they meet Renters' Rights Act requirements.

2. Financial Planning: Reassess rental pricing strategies considering the forecasted moderate growth and increased regulatory costs. Factor these into profitability projections.

3. Tenant Relations: Enhance communication channels and responsiveness to maintenance issues to build trust and reduce turnover.

4. Monitor Market Trends: Use local rental data to benchmark affordability and demand, as national averages may mask London’s unique dynamics.

5. Prepare for Supply Constraints: Explore opportunities for portfolio diversification or refurbishment to retain tenants and justify rental levels.

Tailoring Strategies by Landlord Type

• Portfolio Landlords: Leverage scale to invest in compliance technology and professional management, navigating regulatory complexity efficiently.
• HMO Operators: Pay particular attention to safety and licensing requirements, which intersect with Renters' Rights Act provisions.
• Accidental Landlords: Consider professional support for compliance and financial planning to mitigate risks associated with limited sector knowledge.

Looking Ahead: Conversations to Schedule

Landlords should arrange prompt discussions with letting agents or property managers to:

• Review updated tenancy agreements
• Discuss rent setting aligned with the forecast and affordability
• Plan for compliance audits

Additionally, engaging with financial advisors to revisit cash flow and investment strategies is prudent.

How Rentals & Sales Can Support You

Our expert team offers comprehensive portfolio reviews, compliance audits tailored to the Renters' Rights Act, and pricing strategy consultations designed for the London market. We help landlords transform regulatory challenges into opportunities for sustainable, profitable lettings.

Compliance Disclaimer

This article provides general information and does not constitute legal advice. Landlords should consult a qualified professional to address specific compliance concerns related to the Renters' Rights Act and other regulations.