House prices in the UK are expected to rise by 25 per cent in the next five years, according to real estate adviser Savills.

The number of rental households is also expected to grow by one million as a result of many being forced out of the housing market - putting pressure on rental stock and increasing rents.

The five year market forecast from Savills shows that:

  • house prices are expected to rise by 17 per cent in the next three years alone
  • the South and South East of England will see the strongest five year growth, with all regions outperforming London over the next five years
  • average UK rents are expected to rise by 21 per cent over the next five years, with the largest increase occurring in London 
  • almost 26 per cent of households in London are privately rented - rising 79 per cent since 2001.

Savills said the Government's Help to Buy scheme - intended to help potential buyers with small deposits get onto the property ladder - would help some renters, but that the impact would be 'limited'.

"Help to Buy will allow some trapped renters to access home ownership even though costs of home-ownership will exceed those of renting," said Lucian Cook, Savills head of UK residential research. "But we anticipate that the major beneficiaries of any increase in net lending are likely to be existing home owners."

The rise in rental demand is likely to boost investment in the buy-to-let market.

Commenting on rising house prices, Cook said: "With strong positive sentiment, we expect prices to rise by 17 per cent in the next three years alone."
"But total five year house price growth will be capped by earnings growth, given the likelihood of interest rate rises that will erode mortgage affordability."