The pace of UK rental growth has more than halved since the end of March 2016, slowing consistently since the introduction of an additional 3% stamp duty on second homes, including buy-to-let properties, a year ago, according to the latest rental index from Landbay.

Various experts warned last year that rents would rise as a result of fewer rental homes on the market as the volume of landlords acquiring property would fall due to the 3% stamp duty surcharge. But so far the opposite has happened, with annual UK rental growth slowing to just 0.9% in March 2017, less than half of the rate of 2.27% seen at the end of March 2016.

New rental properties coming to market have been increasing since the rush of buy-to-let purchases ahead of the additional stamp duty that came in last April. This has resulted in a significant rise in available properties for tenants to choose from, causing the pace of rental price growth to slow.

Although at a slower pace than they were a year ago, rents are continuing to increase across many parts of the UK, but in London, average rent paid fell for the 11th month in a row in March, dropping by 0.7%, which is almost four times less than the 1.96% rate of rental inflation recorded in March 2016.

According to the index, the pace of growth outside of London has slowed by over a quarter since the tax hike, from 2.43% in March 2016, to 1.78% in March 2017. At the end of April 2016, the first full month of the changes, rental growth had slowed to 2.17% in the UK and to 2.4% outside of London.

The average rent paid in the UK has now reached £1,191 per calendar month, led by £1,880pcm in London, while the average outside the capital is £752pcm.

Paul Brett, managing director of intermediaries at Landbay, said: “The last 12 months have been tough for the private rented sector, a period marked by the stamp duty surcharge last April, followed by changes to mortgage interest tax relief, tighter underwriting criteria and the pending ban on letting agent fees.

“While the figures suggest that the government has had some success in its efforts to rebalance through the interventions outlined above, policy makers should be wary of imposing any further regulation.

“The private rented sector is a crucial part of the housing mix and needs to be supported by landlords, tenants, housebuilders, lenders and the government alike. Playing the blame game will simply deter further investment and set the housing market off course for good.

“What is now needed are positive measures aimed at encouraging the development of high quality rented properties, a step change outlined in the recent housing white paper.” 

UK Rental Index