The region’s year-on-year growth rate of 2.35 per cent was thought to be due to strong demand for low-rent accommodation from people working in London, according to the latest Landbay Rental Index.
Meanwhile the average UK growth rate was just 0.64 per cent - less than half the 1.83 per cent rate seen at the end of July 2016.
Landbay said the findings highlight the growing affordability crisis facing young people working in the capital, suggesting many are moving further afield to reduce their rent burden, possibly while they save for a house of their own.
Only three out of 19 counties in the South East have seen rental growth above 2 per cent - Medway (3.16 per cent), Kent (2.28 per cent) and West Sussex (2.03 per cent).
All of these areas have more affordable average rents, which are less than half the London average.
John Goodall, chief executive and founder of Landbay, said: “With rising inflation and rock-bottom interest rates it is little surprise to see demand in the more affordable Home Counties rising faster than pricier parts of London and the South East.
“Naturally these surrounding areas are starting to experience a surge in rental prices, creating a ripple effect out from the capital. There are of course a number of factors at play, but as yields tighten in the capital landlords may well be branching out to the East of England in a bid to meet this demand.”
Four of the capital’s five hottest commuter belt hotspots outside the M25 are located in the east of England – Luton, with growth of 4.23 per cent, Peterborough (3.75 per cent), Thurrock (3.56 per cent) and Bedfordshire (3.19 per cent).
While average rents in these towns are less than half the London average of £1,873, they have all seen significant increases in the past year as London rents have dropped by 1.05 per cent.
Jane King, mortgage adviser at London-based Ash-Ridge Asset Management, said: “I am not surprised by this. I know people who live in Peterborough and can get to London quicker than I can from Surrey – and property prices are much, much cheaper.
“Some of the London commuter trains are packed out, and the service is terrible. Commuters from Peterborough get a nice train and can be in London in an hour. It has probably been a secret and people have cottoned on.”
She added that the trend was not necessarily due to people being pushed out of the capital, but also because people were looking for a more rural lifestyle.
