The cost of rented accommodation rose at its fastest pace for five years over the three months to the end of April, figures from the Royal Institute of Chartered Surveyors (Rics) show. A fifth of landlords raised rents over the quarter, the group's latest survey revealed yesterday, as the housing market continued to strengthen.
Rics said improving economic growth and rising employment had boosted demand for rental property in recent months, while the number of immigrants coming into the UK had also continued to add to pressures in the sector.
At the same time, the supply of rented property has failed to keep pace with the rise in demand for accommodation, with investors in the buy-to-let market remaining cautious about the housing market's prospects.
Rents rose fastest in London during the quarter, where demand from tenants has increased to twice its historical average this year. However, the pattern was repeated across Britain, with significant numbers of landlords in both the north of England and Scotland also reporting rent rises.
Jeremy Leaf, a spokesman for Rics, said further rent increases could tempt buy-to-let investors back into property, though yields remain relatively static because house prices have so far risen at a similar pace.
"Economic prosperity and population migration have increased rental demand, making conditions better for property investors," Mr Leaf said. "The recent choppy ride for equities means interest rates are less likely to rise, which is good news for investment."
Rising house prices in the first few months of the year have also boosted the number of would-be first-time buyers who are forced to rent property, Rics said, adding to the upwards pressure on rents.
Figures from the British Bankers' Association, published yesterday, suggested the housing market was continuing to perform strongly. The number of mortgages approved in April was 10 per cent higher than in the same month last year, with the average advance 9 per cent up at just over £140,400.
The BBA said that while the total value of mortgage approvals was down to £5bn last month compared with March's 21-month high of £5.5bn, this was partly the result of a statistical oddity, because April included five fewer working days.
Howard Archer, chief economist at Global Insight, said: "Higher house prices are already pushing affordability ratios back up, along with moderate earnings growth and increased utility bills."
Mr Archer now predicts further modest house price rises over the coming months.