Demand for rental accommodation has fallen to a two-year low, while supply edged up slightly, new figures show.
According to the Association of Residential Letting Agents, there were 26 prospective tenants registered per member branch in December, down from 32 in November and the lowest level since records began in January 2015.
The number of rental properties managed per branch increased from 185 in November to 188 in December.
While supply is still very low, this indicates a broadly positive picture for renters in the short term, ARLA said.
Following the introduction of the 3% stamp duty increase on second homes last year designed to curb the buy-to-let market, 46% of agents expect to see supply decrease this year.
The number of letting agents witnessing rent hikes for tenants increased by three percentage points in December to 19%.
In December 2015, the number of rent rises fell month-on-month, from 23% in November 2015 to 18% in December.
Property website Rightmove is forecasting a 4% rise in rents outside of London in 2017, driven by less availability of rental stock resulting from buy-to-let tax relief changes in April.
Earlier this month, Rightmove said rents are set to increase by 4% outside of the capital, as a reduction in the supply of rental stock puts upwards price pressure for tenants.
Mortgage interest relief for residential buy-to-let properties is set to be reduced to the base income tax rate, which is 20%.
It is due to be phased in over a four-year period starting from April. Landlords are currently able to claim tax relief on the top rate of tax of up to 45%.
The changes mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
Property experts have warned that this could force landlords to sell up, reducing the available rental stock.
All regions except London recorded a rise in asking rents in 2016, with prices up annually by 3.0%, just slightly lower than 2015’s rise of 3.7%.
Northern regions led the way as the year ended, with Yorkshire and the Humber up 4.5% and the North West up 4.4%. In London, more available rental stock throughout the year led to a 4.4% annual drop in prices across the capital.
David Cox, managing director at ARLA, said: “Although December’s figures could indicate a bright future for renters, with the Government’s impending ban on letting agent fees, the future is actually rather bleak for the UK’s renters.
Although we saw demand fall and supply rise slightly last month, these are in line with seasonal expectations and is what we expect to see in December. If the Government goes ahead with an outright ban on fees, tenants will unfortunately be the ultimate victims, as costs are recouped for the vital services fees cover.”
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