Within the next five years, it will become far more lucrative to buy properties specifically for rental returns rather than looking at long-term capital gains, according to a new forecast released this week by the Royal Institute of Chartered Surveyors (Rics).
It said that by the end of this decade, the price of renting a home will rise at a faster rate than house prices, something that has not been achieved, even across the course of the last few years when the rental market has been incredibly strong.
According to Rics latest report, the price of renting will climb by 25 per cent compared to the current price by the end of 2020. This will see it rising year on year faster than the average price of homes.
Rics believes that in the next few years, house prices will be growing by only 4.7 cent year on year, leaving them slower than the price of rent in terms of growth. Next year is expected to be the last year for the foreseeable future where the price of houses will rise faster than the price of renting, with home valuations likely to climb at a rate between three per cent and six per cent.
Simon Rubinsohn, Rics chief economist, said that rents need to increase because the government has tried to penalise and discourage people from putting money into the rental market and investing in properties to let out.
Mr Rubinsohn said there was too much of a focus from the government on trying to get people to buy homes, which is a reality that will see tenants punished further the more landlords are penalised.
“Critically our principal concern with the measures announced by the government is that they are overly focused on promoting home ownership, at the expense of other tenures,” said Mr Rubinsohn.
“Discouraging buy-to-let could see private rents take even more of the strain.”