Rental values of prime residential property ticked up at the start of the year, according to Savills.

In contrast to the preceding quarter, each part of the prime rental market saw rents rise in the first quarter of the year. Nonetheless, annual rental growth remains in low single-digit territory in most locations.

The strongest quarterly rental growth was typically seen in the commuter belt, which has seen the biggest change in fortunes. Meanwhile, there was a noticeably less pronounced improvement in central London, where demand remains more discretionary.

The agency says the market continues to be driven by an imbalance between supply and demand, resulting in modest quarterly rental growth across each prime London price band. According to Savills, six tenants were chasing every prime London property on Savills’ books in March.

Beyond central London, in more domestic markets, there was a change in the pattern of growth. While smaller properties in lower prime price bands have still performed best over the past 12 months, we saw the strongest quarterly growth in higher price bands (above £2,000 per week), with rental properties with five or more beds increasing by 1.2% in the quarter.

“This trend meant Islington and Hampstead were the standout performers in the first quarter of the year, as demand for larger homes focused on the northern wealth corridor emanating from central London” says Jessica Tomlinson, research associate at Savills.

“Landlords have been relatively quick to pick up on the return of rental growth, especially with the impending introduction of the Renters Rights Bill,” says Amelia Greene, head of UK lettings at Savills. “But over half (+61%) of our agents in London say that tenants are expecting to benefit from a fall in rental values, putting us into another period where expectations have to be realigned”.

Outside of London, rental growth tipped back into positive territory over the first three months of the year, the strongest of which was seen in the commuter zone.

“Outside of London, we have seen an increase in the number of families choosing to rent in order to try out new areas that provide access to good schooling. The addition of VAT on private school fees has increased rental demand for larger family homes in educational hotspots as people assess their options” continues Tomlinson.