London rents have dropped for the first time in six years

A fall in rental prices means fewer tenants are paying more than the asking price to secure a home, but those renewing contracts still face a hike

Rental prices in London have fallen by 0.5 per cent over the last 12 months, the first annual drop in six years.

According to figures from Countrywide, demand from tenants has increased by 10 per cent, but the number of homes available to rent in London has risen by a third.

Johnny Morris, director of research at Countrywide said:“The large rise in numbers of homes available to rent has certainly slowed rental growth, even with tenant numbers increasing. Stock levels were already running higher than usual due to investors bringing forward purchases in the rush to beat the stamp duty deadline in April.”

“Uncertainty in the sales market in the run up to, and after the EU Referendum has caused more discretionary sellers to turn to the rental market,” he added.

Talking about the slow down in the north London rental market Arron Bart, head of lettings at Savills Hampstead said: “The issue is one of supply and demand. Currently there are a lot of accidental landlords in Hampstead who can’t sell.”

The disparity between the number of homes available and the number of tenants looking has meant that fewer deals have been agreed above asking rents.

Only 11 per cent of London properties were let for more than the asking price this July, whereas 32 per cent of tenants paid over the asking price in July 2015.

The bargaining power only applies when agreeing rental prices for new lets, however.

The 0.5 per cent drop figure is just for new rental contracts. For Londoners renewing contracts prices in fact rose by 8.4 per cent.

For tenants facing rising rents the solution would seem to be to move, but it often isn’t that simple. Agency fees, removal costs and the proliferation of six week deposits can make moving in London expensive.