A new report shows that residential property prices rose across the UK at the start of 2018, reaching record levels. Further growth is expected this year, continuing for the next five years, according to an industry report.

‘Average rental prices will increase by 2.5 per cent this year and a cumulative 15.5 per cent over the next five years,’ states the report from Gladfish, property investment experts. “This increase is partly reflective of the cost pressure caused by tax and regulation changes,” adds the report.

“An uplift in rents has been on the cards for a while, and is likely to continue into 2018,” comments John Goodall, CEO of property financing company Landbay. “Together with gradually rising interest rates, this will eventually push up borrowing costs for banks and consequently for landlords, who will have to pass some of these costs onto tenants in the form of higher rents.

The report identifies central London as a positive prospect, after a modest 2017. Sales of high value (£5-10 million) properties in the capital picked up in late 2017 and values were relatively stable. “Price growth in central London could return to its long-term trend in 2018,” the report concluded.

Meanwhile, there is growing institutional interest in the UK build-to-rent sector, with a £250 million residential fund announced from the PRS REIT (Real Estate Investment Trust), together with new developments in Croydon, south London, to build the world’s tallest modular towers of up to 44 storeys. These developments will deliver thousands of new homes for rent, as the scarcity of supply continues to keep prices buoyant.