Prime London residential rents will increase by 11.5% over the next five years, according to Savills.
It follows a decline of 9.6% since the EU referendum.
Savills said rents in the capital fell by 0.8% last year. But it said the market showed signs of “bottoming out”, with increases predicted this year.
London rents are forecasted to grow by 0.5% in 2019, 1.0% in 2020 and 3.5% in 2021, stabilising at 3% for 2022 and 2023.
Continued economic and political uncertainty will dampen growth for the next 18 months, while rising supply in London will likely prevent long-term increases, said Savills.
It anticipates a reduction of buy-to-let landlords with debt, as restricted tax reliefs bite into their returns, and an increased share of cash investors. Savills said previous downturns such as the global financial crash saw rents recover within two to five years.
Lucian Cook, head of residential research, said: “We expect cash investors to become increasingly dominant, especially in central London, while history suggests international investors will become more active as uncertainty clears, particularly if they can play the currency card.”
Savills also pointed to uncertainty in the financial services sector and corporate budgets threatening demand.
“The ability to deliver such recovery in rental values over the next five years depends partly on what Brexit ultimately means for London’s high value employment markets,” said Cook.
“But, given the pipeline of prime new build homes that could come to the rentals market, we expect that supply will remain as important a determinant of rental values as Brexit. The next five years should see the post-Brexit falls in rents reversed.”
To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette
