Landlords who rushed to acquire properties earlier this year are now actively renting them out, providing tenants with a flood of properties, according to Rightmove.
The property portal report that there was an 8% rise in the volume of rental properties being listed in the second quarter of the year compared with the same period in 2015.
London saw the biggest increase in supply in Q2, up by 22% on the corresponding period last year, resulting in a fall in average asking rents by 1.1% to just under £2,000 per month.
But overall, despite the increase in supply, rents rose by 2.8% between the start of April and end June outside London in England and Wales, though this is only 0.1% higher than the rise in Q2 2015.
The East of England's year-on-year increase of 5% is the highest of all regions, while the South East saw rents increase the most over the quarter, up by 5.1%.
Rightmove's head of Letting Sam Mitchell commented: "The big spike in March transactions resulting from a large number of investors beating the more punitive stamp duty tax deadline has created a rental supply boost which is good news for prospective tenants actively looking for a new place to live. Now that the stamp duty changes have come in this boost may be short-lived, as landlords consider whether or not to make further purchases."
Rightmove's research among landlords shows that just under a third are concerned that the stamp duty changes, plus the forthcoming tax relief changes, will potentially wipe out their profits.
Mitchell continued: "Once the tax relief changes start to be phased in from next year new buy-to-let activity could slow further. However, rental demand is still outstripping supply in many areas of the country so we may see a shift by investors to look in areas that offer better yields for long-term property investments."
Buy-to-let landlords seeking to add to their property portfolios may wish to look to some of the areas with highest demand from prospective tenants.
The top five places include three in Greater Manchester - Ashton-Under-Lyne, Stalybridge and Oldham - where average asking rents for two-bedroom properties are around £520 per month and you can buy a two-bed home for around £100,000.
The figures from Rightmove also show that rental enquiries as measured by email and phone were up 2% in Q2 2016 compared to last year, and up 1% in the two weeks after the referendum compared to same two weeks in 2015, as the letting market shows no immediate signs of Brexit impact.
Mitchell added: "Whilst it's too early to speculate or predict any long term impact of Brexit for the rental market, these latest figures show that it's business as usual for tenants looking for a place to rent. Naturally we saw a dip in demand the three days after the referendum result, but that soon returned to usual levels of searching. If confidence in buying houses does falter it could lead to more people looking to rent, perhaps in the short-term, and that would mean that rents could rise further."
Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!