The latest Consumer Confidence Survey from Rightmove for Q1 2011 shows that nearly half of current tenants believe that average rents will be higher in 12 months time, providing more evidence of the continued strength of the rental sector. Whilst this is excellent news for landlords, the outlook for concerned tenants is darkened further by new analysis that confirms the continued supply and demand imbalance, with rental search activity up by two-thirds in the last two years whilst available stock is down by nearly a quarter over the same period.

According to Miles Shipside, director of Rightmove “Further rent rises appear to be looming for many, putting additional upwards pressure on the cost of living for tenants in these inflationary times. With such fierce competition for a dwindling stock of properties, those tenants that can play the trump cards of offering the highest rent and quality references to landlords will be best-placed to secure the keys to the home that they want.”

The proportion of tenants in the quarterly survey predicting higher rents in 12 months’ time is now 49%, with 15% of those anticipating that rents could go up by 10% or more. Whilst marginally down on the 53% reported in the first quarter of this year, it continues the theme of increased landlord pricing power which tenants in the survey started to foresee two years ago. The cause of this upwards price pressure on rents, in terms of both tenant expectation and market reality, is most clearly demonstrated by a simple analysis of supply and demand over that period. Search requests for rental property are up by 64 percentage points compared with April 2009 whilst available rental property advertised on Rightmove has fallen by 23 percentage points over the same period. This imbalance between supply and demand has clearly not been helped by the on-going restrictions on mortgage lending which has reduced the number of buyers able to purchase, as well as hindering the ability of many landlords to make new investments.

“Tenant competition in many locations is hot, partly as many tenants are staying in their current rented accommodation for longer, whilst less new stock becomes available. We see some new supply relief on the horizon in locations where capital values are low and rental yields are compelling enough to entice new landlords who are able to secure the necessary finance,” added Shipside.