Rental prices in London have fallen for the first time in six years according to new figures, as more landlords enter the buy-to-let market and rental growth slows across the country.
The latest letting index from property services company Countrywide shows that rent in the capital has fallen by 0.5 per cent in the last 12 months to an average of £1,280 a month.
This may sound like good news for tenants, but the drop only works out at £7 a month, less than the typical price of a cocktail in the capital.
And although this seems to reverse the trend for ever-increasing London rental costs, a HomeLet index released last month came to different conclusions, showing London rent up by 3.9 per cent compared to last year.
Buy-to-let market growth slows across the country
These findings may seem to contradict each other, but the HomeLet research also pointed to a slowing rate of growth, so both surveys seem to agree that the buy-to-let market is faltering a little.
Across the UK as a whole, the Countrywide data shows that rents have risen by an average of just 1.5 per cent. The region where rents are growing fastest is the north, supporting the idea that the north west may be the best area to invest in buy-to-let property.
More landlords enter the market
The relatively sluggish market is explained by an increase in buy-to-let housing supply. The Countrywide index reveals that the number of homes available to rent has increased by a third in London, and is up by 23 per cent in the whole of the UK.
It’s likely that this is due to a buy-to-let purchase frenzy earlier in the year, as landlords took advantage of low interest rates and rushed to beat the new stamp duty rates for second homes, which came in at the beginning of April.
There’s also been a slowdown in house sales – possibly due to Brexit - pushing many would-be sellers to rent out their properties instead.
Is the rental price slowdown short-term?
Despite the results, Johnny Morris, Director of Research at Countrywide, predicts that the trend won’t carry on for long:
“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.”
As a landlord, are you concerned about rental prices taking a hit? Tell us in the comments.