Central London has seen rental growth halve since the introduction of the extra 3% stamp duty surcharge.
Rental price growth has slowed since the extra 3% stamp duty surcharge came into effect in April 2016.
According to the latest Landbay Rental Index, the average rent paid in London fell for the eleventh month in a row in March, dropping by 0.70%. By contrast, rents are continuing to rise outside the capital, albeit at a slower pace.
The average rent paid in London now stands at £1,880, while outside London it is £752.
In London, rents are rising in the outer boroughs where demand for property is increasing. This compares with some of London's inner boroughs, such as Camden or Westminster, which have seen the most considerable falls in rental values.
There had been fears rents would rise due to fewer rental properties available as stamp duty increases looked set to deter would-be investors. However, there was a rush to secure buy-to-let properties in the months prior to the stamp duty increase, which has led to a rental supply boost.
The last 12 months have been challenging for landlords, not only with the stamp duty hike which applies to buy-to-let properties, but the planned ban on letting agents' fees and the cuts to mortgage interest tax relief, which are being phased in from April 6th 2017. These measures are all part of the government's aim to slow buy-to-let investment and help first-time buyers.
Paul Brett, Managing Director of Intermediaries at Landbay, said: "While the figures suggest that the government has had some success in its efforts to rebalance through the interventions outlined above, policy makers should be wary of imposing any further regulation."
He continued: "What is now needed are positive measures aimed at encouraging the development of high quality rented properties, a step change outlined in the recent Housing White Paper."
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