The figures from the ONS shows that rental prices grew by 2.6% in England, 0.2% in Scotland and were unchanged in Wales.
Rents in the UK’s private rental sector increased by 2.4% in the 12 months to July 2016, unchanged compared with the year to June 2016, according to the latest figuresfrom the Office of National Statistics.
26Rental prices increased in all the English regions over the year to July 2016, with rental prices increasing the most in the South East at 3.5%, up from 3.4% in June 2016, followed by the East of England at 3.1% and London at 3%, both unchanged from June 2016. Annual rental growth in the South East has surpassed that of London since May 2016.
Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3% year on year, with July 2016 rental prices being 2.6% higher than July 2015 rental prices. Excluding London, England showed an increase of 2.3% for the same period.
The lowest annual rental price increases were in the North East, up 0.9% and up from 0.8% in June 2016, the North West up 1.2% and Yorkshire and The Humber up 1.3%, both unchanged when compared with June 2016.
But the lack of movement in Wales meant that rents continue to be well below that of England and the average for the country as a whole while rental growth in Scotland has gradually slowed to 0.2% in the year to July 2016, from a high of 2.1% in the year to June 2015.
Looking at data from the UK House Price Index over a longer period shows residential house price growth has typically been stronger than rental price growth for a number of years, with an average 12 month rate of house price inflation between January 2013 and June 2016 of 6%, compared with 2.1% for rental prices.
Inflation in the rental market is likely to have been caused by demand in the market outpacing supply, says the ONS report which points out that the Royal Institute of Chartered Surveyors (RICS) Residential Market Survey reported an increase in demand in the three months to July, while tenant demand increased in June according to the Association of Residential Letting Agents (ARLA).
On the supply side, RICS reported that new landlord instructions were flat in July and ARLA reported that the supply of rental stock bounced back in June 2016, following a sharp drop in May.
It points out that rental prices have been growing at a slightly faster rate than real wages in recent months. Regular pay also grew by 2.3% in the three months to June 2016 compared with the same period last year, continuing a revival of real earnings growth.
The annual jump in private rental prices is a stark reminder of the struggles that many people living in private rented homes are facing in saving a deposit to buy their first home, according to Richard Connolly, chief executive officer of Rentplus, describing it as the biggest barrier to ownership.
He said: "The issue of increasing rents is not confined to London with the largest rental price increases in the South East, followed by the East of England, which highlights the fact that housing affordability is firmly a national issue. The struggles are numerous with aspirant home owners in the current climate also facing rising fuel bills, low salary growth and low interest rates from savings accounts.
"This all points to the urgent need for a rethink in this country on the housing models that are used to migrate people into home ownership. New innovations such as rent to buy models, which allow people to benefit from affordable intermediate rents and make real savings toward a home of their own, ought to be part of an inclusive UK property market which provides secure affordable housing options for all."
