Buy to let rents are close to hitting a glass ceiling that makes them unaffordable for many tenants, according to the latest reports.
Landlord insurer Homelet and leading estate agent Countrywide both claim the rate of rent increases is slowing.
Homelet says ‘early signs’ of problems with affordability are creeping into the market.
Countrywide points out that rents are falling because of a glut of buy to let homes due to landlords purchasing property to beat the 3% stamp duty hike on April 1.
Homelet also points out that the number of homes for rent has spiked in line with the tax change.
Average rents across the country were up 4.4% year on year, while in London, the rise was 6.2%.
The average rent of a UK home is £773 a month, compared to £747 a year ago. In London, the monthly rent is £1,575 compared to £1,515.
Martin Totty, CEO of Barbon Insurance Group, which runs the Homelet brand, said:
“The rental market remains resilient. Landlords are continuing to secure higher rents while there are some early signs of affordability criteria beginning to bear on the rate rents are rising.”
Meanwhile, Countrywide also says fewer landlords are buying buy to let homes after the stamp duty hike of 3% for property investors on April 1.
The number has dropped to the lowest level for six years, with only 8% of homes sold since April 1 going to landlords – down from 18% in the first three months of the year, which was the highest percentage since 2010.
“The lull in landlord activity is mostly due to investors bringing forward purchases in the first three months of the year but upcoming changes to mortgage tax relief and the prospect of heightened uncertainty in the economy due to the referendum will also have made investors warier of entering the market” says Johnny Morris, research director at Countrywide.
“Those extra homes bought at the start of the year are still making their way to market. Despite tenant numbers growing, the increased supply is slowing rental growth.”