Annual rental inflation has increased to 4.5% and LSL said that if inflation continues at the same pace, rents will reach £722 per month this time next year.
LSL figures showed that the average yield remained stable at 4.9% in October, as steady rent rises were matched by modest growth in rental property prices.
In addition, tenant arrears dropped for the second consecutive month in October to within 0.1% of its lowest ever figure. Unpaid rent totalled 9.3% of all UK rent at £221m, down from £229.3m the previous month.
However, LSL warned that arrears may not remain this low as government spending cuts take effect.
David Brown, commercial director of LSL Property Services, said the rise in rent was likely to steady over the traditionally slower Christmas period and added: “A strong underlying growth will remain, as the key market dynamics are geared towards further rises.”
He said: “Constrained mortgage finance is choking off the number of first-timer buyers able to get on the ladder and would-be landlords’ ability to buy investment properties. With rising demand outpacing the increase in supply, rents can only go one way.”
Average rents rose across the UK, with the exception of Yorkshire and the Humber, where they fell by 1.4%. The highest increase was seen in the South East at 1.2% followed by the North East at 1%.
Brown said: “It will be some time before the dust settles, but we’re likely to see a changing rental market at a local level in many places following the government’s changes to housing benefits.
“For instance, in more expensive areas of London, the cap on benefits will weaken demand from tenants, alleviating upwards pressure. But we may see migrating renters move to cheaper outlying regions, pushing up demand and rents.”
