Rental prices in London fell over the past 12 months, the first annual decline for eight years, according to the latest private rental index by the Office of National Statistics.
Rents in London decreased by 0.2 per cent in the 12 months to May. The last time this annual figure was in negative territory was in September 2010.
In the rest of the country rental prices continued to grow, albeit it at a slower rate. Private rental prices paid by tenants in Great Britain rose by 1 per cent in the 12 months to May.
Although this is unchanged from April 2018, the ONS said rental price growth has continued to slow since the end of 2015.
Wales saw the strongest rental growth, with prices up by 1.2 per cent over the year. In England private rental prices grew by 1 per cent, while in Scotland they grew by just 0.6 per cent.
The fall in rental prices in London is having a downward effect on these figures. The ONS points out that rental growth in Britain excluding London increased by 1.6 per cent in the 12 months to May. This figure has remained unchanged since January 2018.
Regionally the East Midlands has enjoyed the strongest growth in rental prices over the past year, up 2.9 per cent to May 2018. This increased from the 2.8 per cent annual growth recorded the previous month.
This was followed by the South West and the East of England, where rental prices in both regions increased by 2 per cent over the past year.
London was the only region where rental prices have fallen. But in the North East they have only increased by 0.1 per cent over the past 12 months.
The Intermediary Mortgage Lenders Association executive director Kate Davies says: “The private rental sector continues to face uncertainty as the impact of the government’s interventions in the treatment of buy-to-let funding continue to work through.
“For many landlords the full economic impact will not be felt for some months yet and will affect individual landlords differently.
“We are hearing claims that large number of landlords may decide to exit the market: it remains to be seen whether this materialise, but given the fall in new purchases by landlords a significant reduction in properties available for private rent would clearly make life more difficult for tenants with higher rents likely being charged on a diminishing supply of suitable properties.
“The government’s interventions were designed to re-calibrate the balance between private landlords and home owners. That balance has evidently changed – as illustrated by the cooling in the BTL market – but care must be taken to avoid a more dramatic shift, which could distort an essential element of the housing market.”