Rents are rising at the fastest rate since 2017, pushing the average yield on residential property to 4.5%, its highest in two years, new research shows, while in London they are at their highest since 2015.

Landlords expect rent rises to continue as costs rise and tenants’ finances improve, which also shows that the value of the private rented sector (PRS) increased by £6 billion in the last year following weakening house prices and subdued growth in the number of rental properties.

The supply of homes in the PRS is expanding by just 0.2% a year, with 5.4 million properties currently in the sector but it suggests overall that the growth of the PRS is subdued on the back of Government intervention and the economic impact of Brexit uncertainty.

The value of the average rental property has risen by 0.3% in the last year, with Brexit uncertainty gripping the wider housing market, although average property prices fell in four regions. The biggest annual decline occurred in London, which took a disproportionate toll on the overall value of the sector.

Meanwhile, reforms to the tax treatment of mortgage interest and tighter lending rules, combined with continued regulatory changes, have hit landlords’ confidence, undermining the supply of properties within the sector, the report adds.

Some 24% of landlords, already expect to raise rents in the next six months, nearly five times the number that expect to reduce them. Improved finances among tenants is also allowing more leeway. Wages are currently rising at 3.4%, up from 2.9% a year ago and well in excess of inflation.