Landlords are experiencing a short-term chill as rents fall amid increasing supply of rental properties that came to the market ahead of the Stamp Duty deadline, according to Your Move and Reeds Rains.

The agents’ buy-to-let index for May showed average rents for homes to let across England and Wales stood at £792 per month, a drop of 0.2% since April, although 1.8% higher year-on-year.

This is half the growth rate of January when rents rose 3.6% annually. Typically rents have risen on average 0.4% in May since the recession.

Rent rises in London slowed to just 1.0% at £1,220 over the twelve months to May 2016, while East Midlands witnessed an annual rent rise of 7.3% to £612. The lowest rents were in the north-east at £515.

Rental yields were steady at 4.9% compared with 5.1% in May 2015.

On a total return basis, the average existing landlord in England and Wales has seen total returns of 10.2% over the twelve months to May. This is slightly lower than 10.7% seen a month before, but higher than May 2015 when it was 9.4%, according to the index.

More worryingly, tenant finances have deteriorated somewhat in May, with 9.3% of all rent due in the month standing in arrears of one day or more. This compares to 8.1% in April 2016.

Adrian Gill, director of lettings agents Your Move and Reeds Rains, said: “This is the equivalent of a flash flood for the rental market.

“Just a month ago rents were heating up and spring was in the air – but this has been put on hold as a tide of new properties to let has disrupted the normal dynamics of supply and demand.”

But he warned that all tides go out again, adding: “Landlords escaping a much larger Stamp Duty bill by completing their purchases before April 1 have now finished their repairs and paperwork, with these homes to let competing for tenants in May and into June. That short-term mismatch has made May an exceptional month, with excellent deals available for some prospective tenants.

“But all tides go out again – and this is definitely no exception. Overall the tax changes to the buy-to-let industry will discourage some property investors, and most of the properties that became available to let in May will have been planned purchases brought forward from later in the year.”

Gill warned that the net effect would be fewer properties to let in the long run.