London rents rose by 7.7 per cent in the year to March as demand for rental property in the capital remained strong, new research shows.
However, HomeLet said that the data comes ahead of reforms that are predicted to have a major impact within the sector, including a stamp duty increase for buy-to-let properties, and could tell a different story next month.
The insurance provider's latest rental index showed that London continued to outpace the rest of the country, with the average rent now at £1,536 over the three months to March compared with £1,427 last year.
Meanwhile rents on new tenancies outside of London rose by 4.9 per cent to £755 over the three months to March. At 2.8 percentage points, the gap between rent rises in London and the rest of the UK was almost unchanged on last month.
The north west was the only region that saw lower rents on new tenancies over the three months to March, with down 3.5 per cent over the year.
Martin Totty, chief executive of Homelet's parent company Barbon, said: “We’ve continued to see increases in rents on new tenancies in almost every part of the UK during the first quarter, as the private rental market has responded to the pressures of an imbalance between demand and supply.
“However, external factors may now come into play: the stamp duty increase has already had an impact and that surge in the acquisition of property by landlords could now cause a short-term increase in the supply of rental property in some areas of the country."
HomeLet’s own data already shows evidence of landlords taking action ahead of the stamp duty changes. In March the specialist provider of Landlord Insurance saw a marked increase in enquiries from property investors, with 37 per cent of insurance policies being purchased by landlords with new properties compared to just 24 per cent in the same period last year.
This echoes recent findings from the Council of Mortgage Lenders showing a spike in buy-to-let lending ahead of the stamp duty increase.