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.
New landlord instructions - a good indication of supply to the market -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 supply of 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.
Across the UK, London saw the biggest increase in rental prices, with a net balance of +86 – the highest number in the series history. A turnaround occurred in the North, where the net balance improved from -3 to +23 but all regions are now recording positive readings.
Looking ahead, the outlook for rents over the next three months remains very firm. 34 per cent more surveyors expect rents to rise than fall, with the expectation that rents for houses will increase at a slightly faster rate than for flats.
Jeremy Leaf, RICS spokesperson, 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."
Matt Hutchinson, director, Spareroom.co.uk, said:
"The rental market is struggling to cope with the demand out there at the moment. New stock coming onto the market is at critically low levels, while at the same time we are seeing an unusually high number of new applicants looking for rooms.
"Desirable rental properties coming onto the market are being snapped up, many within 24 hours, and applicants are having to react quickly to avoid missing out on the property they want.
"It's not unusual for the rental market to see a spike in demand or supply levels. What is unusual is that we're seeing stock levels dry up at the same time as demand levels are spiking, and this is creating a widening and unsustainable disparity between the number of rooms available and the number of people looking for rooms.
"The crisis facing the rental market has also been exacerbated by the first time buyer market drying up, resulting in rental stock being tied up that would normally come back onto the market. There is also a drastic shortage of student accommodation which means areas heavily populated by students, such as London, are really suffering."
