Private tenants saw average rents rise by 2.3% in the 12 months to September 2016, unchanged compared with the year to August, according to the latest data from the Office of National Statistics (ONS).
There remains some regional variation with the figures revealing that rents rose by 2.5% in England and 0.1% in Wales, but dropped by 0.1% in Scotland.
Rental prices increased in all the English regions over the year to September 2016, led by gains in the South East with growth of 3.5% while prices across the country, excluding London, increased by 2.1%.
The latest data suggests that the UK’s housing shortage continues to drive up demand from tenants and push up rental prices, especially in London, according to Shane Ballard, letting director at Greene & Co.
“Today’s data shows that the UK private housing rental market continues to remain strong, as prices rose by 2.3% annually, and remain unchanged on the month, as the UK’s housing shortage continues to push up demand and bolster prices,” he said.
Nick Davies, head of residential development at Stirling Ackroyd, concurred: “The dearth of properties available to rent in London – where demand is highest – is acute. While the city draws in the some of the world’s brightest students and graduates, it lacks rental homes to accommodate them.
“With rents already unaffordable for many young people, we are witnessing the rent rises ripple out to the South East as potential tenants are forced to look further afield.”
Davies believes that the chancellor Philip Hammond should consider scrapping the stamp duty surcharge for buy-to-let properties if he wants to make renting more affordable.
“This would make it make a huge difference to the cost of living for young people, making it easier to save for a deposit to buy their own homes,” he added.
The introduction of the stamp duty surcharge means that many buy-to-let landlords are now achieving even weaker yields, especially in London.
Paul Smith, CEO of haart estate agents, commented: “The problem of spiralling London house prices continues to mean that investors get increasingly poor yields on buy-to-let properties in the capital, a problem made worse by the stamp duty surcharge, and landlords are unable to increase rents much further. We will increasingly see investors moving to the Midlands and the North where prices are lower and yields are more attractive.
“However we’re also seeing interest from overseas buyers bounce back as the pound remains weak, and as such London will remain a well sought-after destination for investment. Longer-term it is not yet clear if this trend will continue.”
Looking ahead, 2017 will not be plain sailing for landlords, with Smith among those who believe that the government will introduce a new wave of measures to clamp down on the private rented sector by introducing stricter regulations for new investors and landlords.