The demand for rental property across the country continued to grow in July 2013 as new tenant applications have increased by 4% on monthly and 16% annually according to Sequence.

National average rents meanwhile have also risen by 2% in July and 6% annually taking the average rental figure to £751. In London rents have increased by 5% annually to £1,437 but have stayed the same as the previous month.

Stephen Nation, Head of Lettings at Sequence, said: “Levels of activity and growth across the rental market are unprecedented and showing no signs of slowing down. New rental contracts agreed have increased to record breaking levels this month, up by 6% on month and 18% annually, which highlights just how much the market is expanding. Buy-to-let mortgage applications continue to increase, up 27% annually, and news that the Bank of England has suggested interest rates won’t rise for another three years has encouraged even more would-be savers to look for greater returns.

“Demand for new rental properties is still rising faster than supply, with new tenant applications up 4% on month compared to a 3% rise in new properties for rent. It is this disparity between demand and supply which has pushed rents up by 2% on month.”

Whilst tenant demand in London has grown 5% on a monthly basis, the supply of properties has risen at a faster rate of 8% per month. Comparing annual growth the divergence is greater, with new applicant registrations up 1% compared to new property registrations up 16%. This imbalance of supply over demand has caused the ratio to decrease to 4.7 applicants to every new property, from 4.8/1, and this decline in competition has caused rents to remain static.

Mr Nation said: “In London, the ratio between the supply of properties and demand from prospective tenants is plateauing, with new applicants increasing by 5% compared to new properties growing by 8%. Both international and domestic investors are overwhelming attracted to the capital’s exceptional asset growth and yields, and are subsequently pushing up supply levels. This has flattened the rents on a monthly basis, but they have still grown by 5% annually and the record levels of activity we have seen in the region, tenancies agreed up by 13% on month, demonstrates the continued strength of the London market.”

July was a record month for the number of new tenancies hitting its highest point for over 11 years (January 2002, when the data analysis records began). The rate of growth has also been exceptional with the number of tenancies agreed increasing by 6% in July and an 18% annually, this growth has been consistent throughout the year, averaging 3% per month since January. London has been struggling to keep up with the national pace, although the rate of growth has been significant, up 13% monthly and 16% annually.