Knight Frank has halved its near-term house price growth forecast to 1.5% for 2026 and lowered itsrental forecasts marginally, due to the economic impacts of conflict in the Middle East.
However, it says that upwards pressure on rents will persist this year following the introduction of the Renters’ Rights Act later this week, with rental growth expected to grow 4% this year and 3.5% next.
The greater risks that the act poses for landlords who want to repossess or sell their property, or even in setting rents and guaranteeing their rental income, will prompt landlords to raise prices in response, the company says.
This could be further exacerbated as supply shrinks further, as more landlords leave the sector. Knight Frank now expects 3.5% annual growth in prime central and outer London this year, up from the current respective rates of 1.2% and 2.8%.
Buyers keep options open by renting instead
The rental market is also being driven by hesitation to buy, according to Tom Bill, head of UK residential research at Knight Frank.
“Rental activity will also benefit in the short-term as demand moves across from the sales market, as higher borrowing costs curb spending power and the current geopolitical uncertainty means people keep their options open. Activity has also been supported to some extent by people looking to temporarily move back to London from the Middle East,” he said.
In addition, new energy efficiency standard responsibilities – including the need for landlords to ensure their properties have an EPC C rating by 2030 – will impact the sector.
This article is taken from Landlord Today