A prominent index suggests that areas of Greater London, the South East and the South West are facing a 12-year high in sales stock levels. 

And it appears much of the reason is the exodus of landlords, quitting the private rental sector because of taxes and red tape.

The Home index says the level of over supply in some southern England regions is such that vendors “are increasingly willing to take a hit on their expectations in order to secure a sale.”

This is in marked contrast to areas of the north of England and Scotland. 

Home’s director, Doug Shephard, puts much of this stock glut down to the increasingly-unviable private rental sector.

He says: “Yields remain significantly better in the North and this factor does not look set to change soon. In certain postal districts of London and the South East, rental yields are less than 3%; certainly not enough to pay a significant mortgage and all the other associated expenses. Meanwhile, savvy investors can find yields as high as 12% in certain postal districts, all of which are to be found in the North.1

“These are the key factors driving the current market. Oversupply stems largely from landlords deciding to quit in low-yielding areas. Vendors and agents alike understand that demand is unlikely to be able to grow sufficiently in order to match the surge in new instructions, especially after the increase in stamp duty on April. 

‘The upside for savvy buyers is that there are certainly bargains to be had in some locations but, as many investors acknowledge, “catching a falling knife” is a risky business. The question that is difficult to answer is: When will the rate of supply return to more normal levels? Since rental returns fundamentally underpin the value of property, the answer may well be: When yields return to a tenable level for investors. Logically, this would only be achieved through a combination of rising rents and falling prices.’

Elsewhere in the latest Home asking price index and market survey, annualised national asking rents have grown just 1.9%, held back in part by London’s annual rent fall of -0.5%. 

In the capital, the City of London followed by Hounslow indicate the largest declines in asking rents, with annualised =falls of 18.9% and 7.7% respectively. Meanwhile, the best performers are Kingston-upon- Thames, Sutton and Wandsworth, with rents increasing by 8.9%, 8.8% and 8.3% respectively. 

The best performing region overall is the East Midlands, with 10.2% rental growth year-on-year. 

You can see the latest Home report here.