The average cost of renting a home in Greater London is now 4.8% higher than it was one year ago in April 2012, according to the HomeLet Rental Index.

Whilst the increase of 4.8% seems high, it is almost half the increase in the previous year of 8.1% between April 2011-12 which was preceeded by a 9.3% rise between April 2010-11.

The average cost of renting is £1,236 per month in London, which is over £100 more than the average for the rest of the South East, making it now 84.2% more expensive to rent a home in Greater London than the rest of the UK.

Ian Fraser, HomeLet’s Managing Director, said: “The combination of lower income and increase in average rents within Greater London could be a result of two factors. Firstly the increase in the amount of people moving into a rented home may have created more buoyancy within the lettings market in Greater London, and helped to keep average rents at a more stable level than a few years ago when they were increasing at quite high rates.

“Secondly, the lower rate of increase could be a sign that people simply cannot afford to pay such high rents. This month’s data shows tenants in Greater London are earning 2.5% less than they were during the same time last year. Therefore, landlords and lettings agents may be now more willing to negotiate rental amounts.

“The Capital’s stabilising rents could also reflect how the lettings industry is increasingly being seen as a long-term family solution. The private rented sector is no longer a housing stop-gap for our nation, and with the Government now focussing on building houses to rent, I believe which will not only benefit tenants, but also landlords and lettings agents who will welcome increased housing stock – and overall confidence – within the sector.”

In sharp contrast, the data shows that when the Greater London figure is removed, the average cost of renting a home across the rest of the UK decreased by 0.2% over the past year to £659 per month.