Falling supply of new property to the rental market coupled with increased demand led to a rise in rents in the three months to the end of October, says the latest RICS Residential Lettings Survey.

39 per cent more surveyors reported seeing an increase in rents over the three month period, than a fall (up from 27 per cent). The net balance reading is now at its highest level since Q2 2007 as increasing numbers turn to the rented sector. Many are seeking to rent rather than buy due to difficulty in securing mortgage finance and the high deposits required by lenders.

As a result, surveyors report the rental market remains buoyant, with properties being let very quickly and landlords experiencing very few voids. Demand for rented property continues to be very strong, with houses being slightly more popular than flats. 33 per cent more surveyors reported a rise in demand than a fall, the fastest increase in demand since 2008.

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New landlord instructions slipped further, marking five consecutive quarters of falling instructions. Respondents report that difficulty in securing buy-to-let mortgages is holding back many would-be landlords, and a fresh supplyof property entering the market.

Meanwhile, renewed falls in the sales market saw fewer existing landlords choosing to sell their property at the end of a tenancy agreement. The proportion intending to do so declined from 4.1 per cent in the three months to July to 2.5 per cent - well below the survey average of 4.4 per cent.

RICS Spokesperson, Jeremy Leaf, said: "The lettings sector has become increasingly strong over the past nine months, in contrast to the housing market which continues to slow. Many have turned to the rental market because they fear further price reductions in the housing market, or because they cannot obtain the necessary finance to buy.

"As a result, rents continue to rise with supply failing to keep up with demand. However, there are increasing indications that more landlords are recognising these benefits and looking to add to their portfolios – especially as there has been a rise in the number of providers willing to offer investment mortgages in recent months.

(CD)