While demand is still extremely high, rental growth has slowed somewhat. This is because the record-breaking double-digit rental growth of recent years was never sustainable, and the report states that the rental market is now expected to return to a more traditional seasonal pattern.
A return to steady growth is good news for the private rental sector, with annual rental growth slowing to 5.8% in May. While this is less than half the peak of 12.2% in July 2022, it is still more than double the 2012-19 average of 2.1%.
According to Savills, the market is returning to its core principles. This means that locations with good transport links, employment opportunities, and homes priced in line with local incomes will see the strongest rental growth. These areas are the best places to target as part of a property business plan.
Savills states: “Graduates entering the workforce are attracted to the security, convenience and high quality of BTR, especially if they have already experienced similar standards of accommodation when living in PBSA.
“Following the steep rise in student numbers since 2019, we will see 4.7 million graduates between 2023–24 and 2026–27, assuming a 10% dropout rate. The rental market will need to accommodate many of them, particularly in London, Manchester and Glasgow, which have graduate retention rates of 41%, 50% and 54%, respectively. It is vital these areas are planning enough supply to match future demand.”
