The latest Index report from Landbay shows that the East of England is leading the way for rental rises, with annual growth in July hitting 2.35%.
This was in comparison to a national rise of just 0.64%.
Increased demand for more low-cost rental accommodation from long-distance commuters is one key factor for the rise. More people are moving away from London, with four of the hottest commuter hotspots being located outside of the M25.
Rents in Luton, Peterborough, Thurrock and Bedfordshire are all less than the average in the capital, but have increased more than 3% year-on-year as a result of increasing demand.
Indeed, rents have risen by 4.23% in Luton, 3.75% in Peterborough, 3.56% in Thurrock and by 3.19% in Bedfordshire. Despite this, actual rents are less than half than the £1,873 average seen in London. Capital rents have actually fallen by 1.05% over the course of the year.
The current pace of growth means a tenant in Luton is paying £789 per month in rent, in comparison to £757 one year ago.
Average UK rents now stand at £1,193, a rise of 0.06% month-on-month and by 0.64% year-on-year. When London is excluded, rents increased by 0.13% month-on-month and by 1.56% year-on-year to an average of £756.
By country, rents have increased year-on-year by 1.34% in Wales, by 1.23% in Scotland and by 0.18% in Northern Ireland. These rises took average rents in the countries to £639, £726 and £560 respectively.
The figures also show that there is a growing affordability crisis for young people working in London. Many are moving further away to reduce their rental burden. Less affordable regions of London’s commuter belt with higher rents have seen less demand and as a result, slower rental growth.
Only 3 of the 19 counties in the South East have seen rental growth above 2% during the last year.
In other regions, expensive regions surrounding London have seen much less rental growth.
John Goodall, Chief Executive Officer of Landbay, said: ‘With rising inflation and rock bottom interest rates it is little surprise to see demand in the more affordable Home Counties rising faster than pricier parts of London and the South East.’
‘Naturally these surrounding areas are starting to experience a surge in rental prices, creating a ripple effect out from the capital. There are of course a number of factors at play, but as yields tighten in the capital landlords may well be branching out to the East of England in a bid to meet this demand.’