Rental price inflation fell to 0.7 per cent in January and is on target to fall below zero within months, the January HomeLet Rental Index reveals. The average monthly rent on a new tenancy signed during January was £888 a month, just £6 more than in the same month of 2016.

The slowdown follows an extended run of higher increases during 2015 and early 2016, peaking at an annual rate of 4.7 per cent in June 2016. Since then, it has fallen every month, accelerating in recent months – in December, rents were still rising at an average pace of 1.7 per cent.

The decline has been most marked in those areas of the country where inflation was previously most rapid. In Greater London it fell to 0.4 per cent in January, down from 7.1 per cent in July 2016. In the South East, it has already turned negative, with the average new tenancy in January costing £989 a month, down 0.6 per cent from £995 in the same month of 2016.

HomeLet’s data suggests that landlords are increasingly cautious amid concern that tenants are reaching an affordability ceiling. While the long-term imbalance between supply and demand in the PRS remains, landlords are conscious of tenants’ finances.

Nevertheless, many landlords will also be aware of higher costs to come. In April, the Government is due to begin withdrawing tax relief on mortgage interest for buy-tolet investors; ministers are also pressing ahead with plans for a ban on upfront fees charged by lettings agents, which may see such charges passed on to landlords.

Until recently, many in the PRS thought landlords would mitigate the impact by raising rents, but if tenants cannot afford more, they may have to accept lower returns. So far, there is little sign of landlords panicking at the prospect of slowing rental price inflation. But faced with an uncertain economic outlook, as well as the prospect of rising costs, landlords will be watching the marketplace closely in the months to come.