Asking rents are continuing to drop as the supply of property to let increases, according to a new report.
Historically, asking rents for new properties coming on to the market increase in the third quarter of the year, as it is typically one of the busiest times for tenants looking for a new place. But fresh data shows that rents actually fell in Q3 2017 as supply started to exceed demand.
Asking rents fell by 0.2% in the third quarter, owed largely to a 2.3% price drop in the South East, where rents are down annually for the first time over the past six years, at -1.9%, to reach an average of £789 per calendar month (pcm), according to the latest Rightmove Rental Trends Tracker.
Sam Mitchell, head of lettings at Rightmove, said: “Since last April’s second home stamp duty changes came in the supply of new rental properties in the South East has been steadily increasing, up 5.5% on this time last year.
“Agents are reporting that some investors looking for better yields are shifting their focus from London to instead buy in the surrounding counties of Surrey, Berkshire and Buckinghamshire.
“The increase in stock in the South East has led to softening in rents in some areas where there is less competition among tenants, but they are holding up in key commuter areas where tenant demand is strong.”
In London asking rents are at their lowest at this time of year since 2013, although analysts at the property website suggest that a drop in supply and increased demand could mean rental prices will start to rise again soon.
The study also revealed that properties are taking 8% longer to find a tenant outside London and 5% longer in London than in Q3 2016
Mitchell added: “Last year the supply of rental properties in London increased as much as 26% when investors rushed to buy ahead of the stamp duty changes, leading to cooling rents over the last 12 months in the capital.
“Now it appears that rental investors are starting to move their money away from London with a number of agents across London saying that investors are being replaced by first-time buyers. This is likely to constrict rental supply in the capital and lead to rents increasing again, so now would be a good time for prospective tenants to act, before this happens.”