Annual rental growth slowed to 3% in October, which is the lowest rate of increase this year, HomeLet's latest Rental Index has found.
Average UK rent now stands at £902 per month, which although higher than October 2015's average of £875, is £8 lower when compared to September 2016.
Rental price inflation has fallen from a high-point of 4.5% in March 2016 and the rate of increase has now dropped in each of the past four months. This slowing rate of growth reflects modest decreases in average rents in many areas of the country, which may suggest that the market is approaching an affordability ceiling.
The contraction in the pace of rental price inflation is most marked in areas of the country where rents were previously rising most quickly.
In Greater London, rents on new tenancies rose by 2.5% over the year to October, having been increasing at a rate of more than 7% a year ago. In the broader South East region, rents rose at 2.7% on an annualised basis last month, down from above 4.3% this time last year.
Even in those areas of the country where annual rental price inflation is at its highest, rents fell back in October. Both the West Midlands, where rents were 5.1% higher than in October 2015, and the North West, where rents were 4.4% up, saw small falls compared to September.
Despite the slowdown, the September 2016 HomeLet Rental Index reveals that rents rose in 11 out of the 12 regions surveyed recording an increase over the year to the end of September, with Scotland the only region to see annual rents fall, down 0.4% year-on-year.
Martin Totty, chief executive of Barbon Insurance Group, HomeLet's parent company, said: "Landlords are aware of the need to find a balance between what tenants can afford and the returns they require on their investment. While many landlords are facing higher costs themselves, including the impact of higher stamp duty on their property purchases since April, our data suggests that they have so far been cautious against a more uncertain economic environment.
"We know wage growth has lagged rental price inflation and it could be that we are approaching an affordability ceiling whereby landlords can't attract tenants able to afford higher rents."
The latest HomeLet figures also shows that the average tenant is staying in their property for just over 28 months, the longest duration for some time, and Totty believes that this suggests that landlords "are valuing the security of a reliable tenant," and accommodating their wish to remain in the property for longer. "This is reflected in the rent asked at each anniversary," he added.
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