Property experts have welcomed steady growth in private rents as a sign that the buy-to-let market is shrugging off the Government's tax crackdown.
Rental prices rose 2.6% in the 12 months to January, up from 2.5% in the year to December 2015, according to the index of private housing rental prices for January, from the Office for National Statistics.
Rental prices increased in all the English regions over the year to January 2016, with rental prices increasing the most in London at 3.9%.
David Whittaker, managing director of Mortgages for Business, said private sector rents are making steady progress across the UK.
“Fortunately for tenants the rental price increases are not enormous, or unreasonable, given the level of demand in the market. But they are sufficient to offer landlords some encouragement.”
Whittaker said the figures show that it is "business as usual" for the private rental market, despite recent economic and political hits.
But he warned that existing and potential investors must exercise caution before they rush to expand their portfolios.
“The Treasury’s restriction of buy-to-let mortgage interest relief has yet to take full effect, while the 1 April stamp duty hike will mean landlords will need more up-front capital to purchase a new property. Both of these changes will hit profit margins."
Steve Bolton, founder of Platinum Property Partners, said rents were being driven by a shortage of suitable properties and strong tenant demand.
He warned that ending tax relief for landlords and levying a higher rate of stamp duty will increase investor’s costs, forcing many to push tenants’ rents up to remain profitable. “Standards may also be reduced, with landlords having fewer funds to invest in the quality of their property.
“In some instances, landlords will be forced to sell, adding additional strain to private rented sector housing stock.”
Bolton said it is hard to see how the proposed changes will benefit prospective first-time buyers.
“The biggest barrier to homeownership is a lack of adequate property supply, and discouraging buy-to-let investment will do nothing to alleviate this.”