However, it warned that growth would not be suppressed for long, with 2011 overall seeing a 4% increase in average rents and total annual returns for landlords rising to 3.7%.
In addition, the seasonal drop in rents was notably less than that of December 2010, which recorded a fall of 1.2%.
LSL’s buy-to-let index also showed that the proportion of rental arrears rose to 10.7% in December compared to 9.3% in November, suggesting Christmas spending took its toll. Nevertheless, rental arrears were down compared to the same period of 2010, when they totalled 11.7%.
On a monthly basis, rents fell in seven regions, with the biggest declines in the South East and North East, where they fell by 1.9% and 1.4% respectively.
Rents in London fell for the first time since December 2010, down by 0.9%, compared to a drop of 2.3% a year ago.
David Brown, commercial director of LSL Property Services, said: “The rental market was sheltered from the full impact of the seasonal lull by the strength of underlying tenant demand as many prospective renters took the opportunity to move in the run-up to Christmas at a time when the market is traditionally less competitive.”
Brown added that, with the mortgage market facing challenges from the eurozone crisis and the sluggish wider economy, credit conditions are unlikely to ease significantly this year.
He said: “As a result, the number of first-time buyers able to secure finance isn’t about to rocket up and demand for the limited supply of rental accommodation will continue to rise. It won’t be long before rents will resume their upward march.”
