‘Volatile Rental Market’ Expected to Stabilise Soon, Predicts Savills

Summary: Savills forecasts that the recent volatility in the UK private rental market will ease over the coming years, with tenant demand and rents expected to soften as the effects of the pandemic diminish. However, the implementation of the Renters’ Rights Act may cause further disruption if landlords exit the market, reducing supply.

Rental Market Turbulence Set to Calm

Scenes of desperate tenants competing fiercely for rental properties, a common sight during the pandemic, are predicted to become less frequent. According to Savills, a leading lettings agency, the private rented sector (PRS) has experienced unusual turbulence in recent years, but this is expected to settle in the near future.

Emily Williams, Director of Research at Savills, explains that while the rental market has been volatile, conditions are forecast to normalise over the next five years. She anticipates that rents will increase at a rate between inflation and income growth, easing affordability pressures for tenants.

Affordability Challenges Remain

Williams’ research challenges recent claims by Rightmove that tenants are spending half their income on rent. Instead, Savills highlights that the proportion of income spent on rent has risen from 30.4% in 2020 to 32.4% in 2025. This represents the most significant deterioration in rental affordability since at least 2006, and likely since the early 1990s.

Despite this, the expectation is that as demand begins to stabilise, the market will return to more sustainable levels, reducing the intense competition and pressure on tenants.

Supply Constraints and Landlord Exits

The PRS has faced supply challenges over the past decade. Savills notes a decline in landlord instructions to let properties since 2017, driven by several factors:

• Tax reforms affecting buy-to-let profitability
• Rising interest rates increasing borrowing costs
• Anticipated regulatory changes creating uncertainty

These factors have made buy-to-let investment less attractive, prompting some landlords to exit the market. This reduction in supply has contributed to the volatility and affordability issues experienced by tenants.

Build to Rent Sector Insufficient to Fill the Gap

While Build to Rent (BTR) developments have grown, their scale remains insufficient to meet demand. Savills reports an average of just 15,000 BTR completions annually, a modest figure compared to the 4.9 million households currently renting privately in the UK.

This shortfall means that the PRS continues to rely heavily on traditional buy-to-let landlords to provide rental homes.

Potential Impact of the Renters’ Rights Act

Savills warns that the introduction of the Renters’ Rights Act could reignite market disruption. If the Act leads to a significant number of landlords leaving the sector, supply could tighten further, potentially increasing rents and reducing tenant choice.

Landlords should therefore carefully consider the implications of the new legislation on their portfolios and the wider market.

Implications for Landlords

For landlords, the forecasted stabilisation of the rental market offers some reassurance after years of uncertainty. However, ongoing challenges such as regulatory changes, tax pressures, and market sentiment require careful management.

Maintaining compliance with evolving legislation and adapting to market conditions will be crucial to sustaining rental income and tenant demand. Landlords may also wish to explore opportunities within the Build to Rent sector or diversify their portfolios to mitigate risks.

Conclusion

In summary, Savills predicts that the UK’s private rental market will calm in the coming years, with rents rising moderately and tenant demand easing from pandemic-driven peaks. Nevertheless, the sector faces ongoing supply challenges and potential disruption from new legislation, underscoring the need for landlords to stay informed and proactive.

For further guidance on managing your rental portfolio amid changing market conditions and legislation, visit Landlord Association.

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Savills predicts the UK private rental market will stabilise over the next five years as pandemic effects fade, but warns the Renters’ Rights Act could cause further disruption if landlords exit the market.

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UK Rental Market to Stabilise Soon, Savills Predicts – What Landlords Need to Know