JLL recently published their latest UK Residential Forecasts Report (Q4 2022). Crediting the UK’s chronic housing shortfall as a key driver for the property market’s continued strength and resilience, JLL forecasts that there will be a national shortfall of 610,000 homes over the next five years alone – up from their previous prediction for an already stark shortfall of 500,000.
The report also provides a strong insight into the UK’s rental market, forecasting Manchester and Birmingham as leading UK cities for property price and rental growth over the next five years.
UK Rental Market
Commenting on the UK’s strong rental markets, JLL noted the persistent lack of high-quality rental homes as an ongoing issue for the UK, highlighted by recent rental growth.
This unprecedented demand for quality rental homes is reflected in ongoing investor appetite for purpose-built rental homes in UK city centres: “Annual investment in the UK living real estate sectors has exceeded £10bn in the third quarter of 2022, putting living on track for a record year.”
As fewer households move across into owner occupation due to current market conditions, demand for rental properties is set to increase further. JLL predict that prospective buyers will remain in the rental market, “adding further fuel to an already constrained rental market”, resulting in continued rental growth.
As a result of the demand for quality rental properties, “the purpose-built UK BTR sector is expected to outperform the wider UK rental market in terms of rental value growth.”
City Centres to Outperform
After London, Manchester and Birmingham are expected to be the next strongest housing markets in terms of house price growth.
These cities have seen demand significantly outstrip housing supply post-pandemic, as young professionals and students have looked to return to the UK’s major cities. With most companies embracing a mix of home and office working as the new normal, there is an increased need to maintain proximity to the workplace.
JLL also credited energy efficiency as a key driver for the popularity of new build city centre homes, with renters looking at new ways to minimise their energy bills in the current climate. This will boost demand for new urban rental homes underpinning stronger rental value growth.
At 19.3%, JLL forecasts Manchester to see the highest house price growth of all UK cities by 2027. Manchester is also top of the table for rental growth forecasts, at 21.6% cumulative growth by 2027.
“Manchester city centre, which is one of the fastest growing economies in the UK, is expected to see the strongest rental value growth over the next five years as increasing numbers of young professionals are attracted to live and work in the city.” Listen to our latest podcast with Urbanbubble on Manchester’s record-breaking quarter.
House Price & Rental Growth Forecasts
Find out what’s attracting investors and renters to Manchester in our free Investment Guide.