The rush by first-time buyers to beat a stamp duty holiday deadline has triggered a short-term dip in rents, a lettings network said today.
Typical monthly rents fell by 0.6% month-on-month in February to reach £707 in England and Wales, following a rise in January, according to LSL Property Services which owns chains Your Move and Reeds Rains.
- Typical monthly rents fell month-on-month in February
- Rush in first time buyers triggered price dip
- Rents typically risen on annual basis
Rents soared last year as trapped would-be buyers found themselves unable to raise the deposit needed or meet the borrowing criteria to get on the property ladder.
But estate agents and lenders have reported a recent surge in interest from first-time buyers trying to take advantage of the current stamp duty concession.
The 1% stamp duty rate for first-time buyers on properties worth between £125,000 and £250,000 will be reintroduced from Saturday next week.
Stamp duty holiday
David Newnes, director of LSL Property Services, says: "The looming spectre of the end of the stamp duty holiday has taken its toll on tenant competition in the run-up to the deadline, easing the upwards pressure on rents.
"In February an increased number of tenants either became owner-occupiers or seriously considered property purchase, rather than renewing their contract or seeking a different rental property.
"With fewer tenants than usual actively competing for properties, combined with a slight improvement in the number of rental properties becoming available, many landlords priced less aggressively to avoid the prospect of a void period.
"In the longer-term it's difficult to see a prolonged decrease in the tenant demand underpinning rental inflation."
Newnes highlights recent increases in mortgage rates, with a spate of lenders such as Halifax announcing hikes this month, which he says will put prospective buyers off leaving the rental sector.
He says the Government's recently launched NewBuy scheme to give a helping hand to those purchasing a new-build home will only assist a "limited" number of buyers.
But he adds: "Its impact will undoubtedly be offset by the removal of the stamp duty holiday. As a result, and given the growing number of households, the pressure will remain on the private rented sector."
Rents risen on annual basis
Despite the monthly drop, rents have typically risen on an annual basis, increasing by 3.5%, or £24, on average in the past year.
The biggest increases in the past year have been in London which saw a 5.6% rise to £1,028 and has also seen relatively strong house price rises.
Rents have fallen in only one region on a year-on-year basis, dropping by 0.2% in the East Midlands to average £535.
Rental arrears dropped in February as tenant finances improved, with 9.3% of all rent late or unpaid at the end of the month compared with 10.7% in both January and December.
The survey suggests the easing back of inflation has helped tenants to get their monthly budgets in better order.