Private rental prices paid by tenants in Great Britain rose by 2.5% in the 12 months to June 2015, according to the Office for National Statistics Index of Private Housing Rental Prices.
Private rental prices grew by 2.5% in England, 2.1% in Scotland and 0.8% in Wales in the 12 months to June 2015.
Rental prices increased in all the English regions over the year to June 2015, with rental prices increasing the most in London (3.8%).
Overall consumer price index (CPI) inflation stood at 0% over the same period.
Steve Bolton, founder of Platinum Property Partners, said: “Last month saw the biggest annual increase in average rents seen since January 2013. A shortage of suitable properties, coupled with strong consumer demand – both from people priced out of the housing market and those who find renting better suits their lifestyle – has set rental prices on an upwards trajectory.
“This rise in rents isn’t likely to slow down any time soon, particularly as landlords now face a number of increasing costs. The prospect of an interest rate rise, together with the cap on mortgage interest tax relief introduced in the Budget, could pressure some landlords to increase their rents as they look to regain some of their profits.
“While growing wage packets mean some tenants will be able to cope with higher rents, landlords should be focussing on revisiting their strategy rather than passing their costs directly on to tenants. The Houses in Multiple Occupation (HMO) model provides up to three times more rental income than a standard buy-to-let investment, providing a sufficient buffer against rising costs. Our recent report showed HMOs achieved a 40% higher return on equity from 2010-14 compared to the wider buy-to-let market*. HMOs are also beneficial for tenants: PPP analysis shows that tenants living in high quality shared accommodation pay £419 less each month in rent and bills than someone who is renting alone.”
Betsy Dillner, director of Generation Rent, said: “The government might cheer zero inflation but it means very little to those of us who see any pay rises end up in our landlords' pockets.
“As more people find themselves stuck renting, runaway rents will drag the economy down. Ministers urgently need to ramp up their investment in new homes, and bring in rent controls to lower the cost of living for all.”