Countrywide’s latest lettings index shows rental growth slowing in every region of Britain because of a glut of homes coming to the market.
London recorded the first annual drop in rents for six years, falling 0.5 per cent over the last 12 months making the average rent £7 per month cheaper than it was in 2015.
The last time rents in the capital recorded a year-on-year fall was in November 2010, when the average monthly rent in London was £923 - that’s 39 per cent less than today. Across Britain, rents rose 1.5 per cent year-on-year, the slowest rate of growth since 2012.
While tenant demand has increased nationally, the volume of homes coming onto the rental market has at least slowed or in some cases reversed rental growth.
In July there were 23 per cent more homes available to rent in the UK than at the same time last year, while the capital saw a rise of a third.
Some of this increase has been driven by purchases rushed through to beat the April 1 stamp duty deadline; however the number of homes available to rent has continued to rise in recent months, particularly in London and the South East.
An increase in the number of homes on the market has meant fewer deals being agreed above asking rents.
A year ago, in July 2015, some 16 per cent of tenants paid over the asking rent to secure a home compared to seven per cent in July 2016.
In London the fall was larger with 11 per cent of homes let for more than the asking price in July, down from 32 per cent in July 2015.
In July the average rent in the UK was £951 a month, up 1.5 per cent on last year, but rising half as fast as in July 2015.
Rents in London, the south east, Wales and Scotland were all down; yet across cross the north of England and the Midlands, the rate of rental growth hit the highest level for two years.
“Stock levels were already running higher than usual due to investors bringing forward purchases in the rush to beat the stamp duty deadline in April. Added to that, uncertainty in the sales market in the run up to, and after the EU referendum has caused more discretionary sellers to turn to the rental market” explains Johnny Morris, director of research at Countrywide.
“While rental price growth has slowed, current market dynamics are likely to accelerate the growth of renting. It seems that with more stock and demand from tenants we will see the number of households renting increase in 2016” he adds.