Rents climb 2.2% after stamp duty hike squeezes London property supply

The annual rate of rental growth in Britain doubled from 1.1% to 2.2% between June and July, driven by a turnaround in the London market, according to property group Countrywide.

Its lettings index showed a run of eight consecutive months of falling rents in London came to an abrupt end in July.

Rents in the capital ended the month 2.1% up on last year, as the number of properties available to let fell sharply.

Countrywide said the rise was down to a steady drop in supply, with fewer landlords buying properties after stamp duty rates increased by 3% for second-home buyers, such as buy-to-let investors, from 1 April 2016.

This July saw the proportion of London homes bought by a landlord fall to the lowest level for seven years - just 10.5% of all homes sold in the capital - and half the 2015 average of 20.9%.

However, the number of would-be tenants in the capital was unchanged on last year, meaning the same number of people chasing fewer homes.

Across Britain, the number of homes to rent grew 4% year-on-year, but the rate of growth slowed in each of the last 10 months.

Rents rose fastest in the South West, East of England and Greater London. Outside these areas, Scotland saw the fastest rental growth, at 3%.

Johnny Morris, research director at Countrywide, said: "The rush to beat higher stamp duty rates in April 2016 caused a spike in the number of homes to rent, but that has now worked its way through the market.

"The stock of homes to rent is now falling in the more expensive parts of the country because higher tax rates have dissuaded large numbers of landlords from buying. Ultimately this means fewer homes on the market and higher rents.

"Across the Midlands and the North, higher rates of stamp duty are much less of a disincentive to investors.

"Here the number of homes on the market remains up on last year, buoyed by investors living in London and the South East choosing to buy in the Midlands and the North."