Rents in the private rental sector rose by three per cent in 2014, six times the latest rate of inflation, the latest figures from Your Move and Reeds Rains, both of whom are part of the LSL property services group show.
The rise in rental prices reflects historically high demand from tenants for this time of year, supported in part by falling unemployment and rising wages.
According to the data from the Your Move and Reeds Rains buy-to-let index, the average residential rent reached £767 in December, up from £745 the year before.
In the East of England, Yorkshire & Humber, East Midlands and London there was no seasonal fall and new records were set.
“In particular a jobs boom across the eastern regions of England has seen a larger than usual number of people relocating in the winter months,” said Reeds Rains and Your Move Director, Adrian Gill (left). “This has pushed up rental prices in these regions even further.”
Rents are higher than a year ago in no fewer than eight out of 10 regions of England and Wales, led by the East of England, with a 7.6 per cent annual rise.
The East Midlands has seen rents rise by 6.2 per cent on an annual basis, followed by London where rents are up 4.1 per cent year-on-year, and Yorkshire & the Humber with a 3.4 per cent annual rise. Consequently, all four regions have seen rents at record highs in December.
In contrast, average rents in the North East dropped by 2.1 per cent on annual basis, while rents in the South West are 1 per cent lower year-on-year.
The rise in rents has led to an increase in the volume of tenants falling into rental arrears, with 8.9 per cent of rents in arrears in December, up from 7.5 per cent in November. However, December’s level of arrears marks an improvement on the 9.7 per recorded during the corresponding month in 2013.
Separate figures highlight why buy-to-let remains an attractive investment to many people, especially when compared to the dismal saving rates currently available with the banks, with the gross yield on a typical rental property in England and Wales reaching 5.1 per cent in December 2014, with total annual rental returns at 11.1 per cent.
Meanwhile, the latest data from HomeLet reveals that Leicester, Southall and Cambridge recorded the highest rental price growth in 2014.
By contrast, Colchester, Croydon and Brighton saw the biggest falls in rental prices last year.
The HomeLet Rental Index shows that the average rent in the UK for 2014 was £867 compared to £813 in 2013, with further rental market growth anticipated in 2015.
Commenting on the report, Martin Totty (left), the Chief Executive Officer of Barbon Insurance Group, of which HomeLet is a part, said: “2014 was predominantly a year for growth in the rental market with rental prices on average 6.6 per cent higher than in the previous year.
“With property prices continuing to grow, and mortgage criteria tightening, the rental market represents a much more accessible option for house hunters than the property ladder. The demand for rental property is increasing, and we expect it to continue doing so in 2015 as large numbers of people are priced out of buying. As a result, we expect to see continued growth in rental prices across the UK as the new year progresses, particularly as real incomes are starting to rise.”