Specialist broker Finanze has predicted that across the UK rents will rise by an average of 12.91 per cent this year.
According to the firm’s annual research report, rents will see the biggest increase in the first quarter of this year, with those in London facing the biggest hike of 4.3 per cent in Q1.
In particular, it noted that the fact some lenders have pulled out of the government guarantee scheme, which supports first-time buyers with a 5 per cent deposit, will make it harder for individuals to get out of the rental market.
In addition to this, higher stress test rates mean many people will need to save more for a deposit while battling inflation at the same time. These barriers will force many to continue to rent in Finanze's view.
The firm, which provides finance solutions for bridging, buy-to-let, commercial and residential mortgages, said that 2023 will be a crucial year for the London housing market.
It pointed out that in recent years the capital has seen a substantial reduction in foreign investment.
According to data from MSCI, foreign transactions accounted for just 57 per cent of investment in London in 2021 compared to 65 per cent in 2015.
Finanze believes this reduced investment will have a knock on effect on property prices in the capital, which it expects to fall by 15.40 per cent.
Across the UK as a whole it predicted house prices will drop by 10.98 per cent.
Outside of the residential market, Finanze said that the rising cost of inputs and debt will lead to more business insolvencies and cost reductions in the year ahead, which will in turn have a negative impact on the market for commercial property.
An analysis by Alliance Fund suggested that in 2022 transaction volumes declined by 20.1 per cent compared to the previous year.
Reflecting on 2022, Finanze’s head of specialist finance and research, Joshua Ellard said: "This time last year many would have been expecting a period of recovery in which the economy could thrive and recover from the global pandemic.
"In reality 2022 has thrown everything at us, from both economic and political perspectives.”