Demand for rental homes has fallen to a two-year low, while the supply of properties to rent has edged up marginally, new figures from the Association of Residential Letting Agents (ARLA) show.

ARLA said there were just 26 prospective tenants registered per branch in December, down from 32 in November and the lowest figure recorded since records began in January 2015.

The trade body also reports that prospective renters now have more properties to choose from, after the number of rental properties managed per branch increased from 185 in November to 188 in December.

The narrowing supply-demand imbalance in the private rented market suggests that rents will flatten or even fall in the coming months. But following the introduction of the 3% stamp duty surcharge on second homes, including buy-to-let properties, last April, almost half (46%) of agents expect to see housing supply in the sector fall this year.

David Cox, managing director at ARLA, said: “Although December’s figures could indicate a bright future for renters, with the government’s impending ban on letting agent fees, the future is actually rather bleak for the UK’s renters. Although we saw demand fall and supply rise slightly last month, these are in line with seasonal expectations and is what we expect to see in December. If the Government goes ahead with an outright ban on fees, tenants will unfortunately be the ultimate victims, as costs are recouped for the vital services fees cover.”