Increased tenant demand and a shortage of properties pushes rents higher, says the latest RICS Residential Lettings Survey.

RICS say that 26% more chartered surveyors reported a rise in demand for property rather than a fall, which was the second consecutive quarter that lettings demand has risen at a pace above the long run average. Tenant demand increased across all regions, but was strongest in London and the East of England. Continued difficulty in securing mortgage finance, worries over a double dip in housing and large deposits required by lenders are leading to higher numbers seeking to rent rather than buy.

As a result, rents increased for the second consecutive quarter, with 27% more surveyors reporting a rise in rents than a fall. Just a year ago the picture was very different, as an over supply of rental property in many locations pushed rents down and 29% more surveyors were then reporting falling not rising rents.

James Scott-Lee, spokesperson for RICS, said: “Supply of lettings property continued to fall in the three months to July, although at the slowest pace in a year which amid rising tenant demand has helped propel rents higher for the second consecutive quarter. Existing landlords keen to expand their portfolio may still be struggling to access the necessary finance despite improved market conditions.

“However, there is a possibility the lettings market could face a modest increase in supply in the coming months. The latest RICS Housing Market Survey shows a lack of funding has stifled demand from buyers which may cause some moderation to rents.”

John Heron, Paragon Mortgages managing director, said: “The RICS figures echo what we have been saying for some time – the private rented sector has to expand to meet growing levels of tenant demand. With fewer owner-occupier mortgages available, limited resources in the social housing sector and wider social and demographic changes, such as a growing population, increasing net migration and rising numbers of single person households, we are entering the age of renting. Unless the private rented sector is able to meet this growth in demand, rental inflation is likely.

“A thriving and responsive private rented sector is vital socially and economically, and at the heart of this is the need for active and motivated private landlords to invest in and upgrade private rented property stock. Unfortunately, the buy-to-let market is still focused on small scale landlords and failing to serve the needs of professionals who require finance for more complex investments, such as multi-unit blocks and Houses in Multiple Occupation. Until this changes, it is likely that we will continue to see supply failing to keep up with demand.”