The supply of rental homes will most likely be constrained by the introduction of a Stamp Duty surcharge of 3% on buy-to-let properties and the restriction on tax relief on mortgage interest payments. Both measures will limit the ability of some private investors to expand their portfolios. This presents a major opportunity for large-scale investors to step into the gap created by a fall in off-plan sales to buy-to-let investors.

A mismatch between supply and demand will continue to underpin rental growth and attract increasing numbers of institutional investment at scale. Savills recorded investment deals worth a total of £2.6 billion in 2015 – a third of which was supported by institutional investment. The lack of available stock is prompting an increase in deals to forward fund development for rent.

Investors are now also looking beyond London to cities with high concentrations of households in the rental market. Manchester, Reading, Edinburgh and Bristol are all cited as the cities with the best investment potential, offering excellent financial opportunities in the coming years.