The last three months have seen a rise of almost 20% in new tenancies, according to the latest ARLA quarterly survey of its member letting agents.

This sharp rise in demand has in part been the cause of an increase in rental returns, which throughout the country rose from 4.8% to 4.9% for both houses and flats. Outside of Central London, 64% of agents continue to report that tenant demand exceeds the supply of properties on their books, while in the central London area this reduces to 41%.

The ARLA survey shows that the values of houses to rent in prime central London rose by 8.3%, although in the rest of the South East they fell by 4.3% and by 2.2% elsewhere.

The values of flats to rent rose by an astonishing 13.7% in prime central London and, away from London and the South East, still rose marginally by 0.4%. In the South East, away from London, values fell by 4.6%.

ARLA believes that, although these figures are comparable to the latest figures in the Land Registry Index, there is also a probability that more expensive properties being released onto the rental market have had an effect on the responses to the survey.

Despite these bullish figures, investment landlords are still waiting to see what will happen to property prices before making new investment decisions. However, it is now clear that the peak for buying and selling rental property occurred during the autumn and spring of 2006/7.

Commenting on the latest figures, Ian Potter, ARLA’s Head of Operations said, “This steady rise in rental growth that we see yet again, coupled to clear evidence that there is no unusual selling, proves once again that the credit crunch effect on the private rented sector exists only in the imagination. This is underlined by the short void periods and length of time that tenants stay in rental properties.”

The average time rental properties are empty remains short, at an average of four weeks or less a year. This take up is further boosted by tenants continuing to stay in properties for longer periods. On average, tenancies are lasting for 16.7 months, rising to well over 18 months in London.

Rents have increased moderately over the last six months. The average rent achieved for the three months to the end of August was £387 a week for houses and £253 for flats. Prices ranged from £799 a week for houses in central London and £532 for flats, to £214 for houses and £144 respectively away from London and the South East.

The latest figures show an average rise in rents of 3% for houses and 7% for flats, largely driven by the London increases. Across all regions, the average rent of a house is at least half as much again as the rent for a flat.

All areas report that there are properties, mainly houses, coming on to the rental market because they cannot be sold. However, as yet, the number is unquantifiable. Meanwhile, 84% of ARLA’s member letting agents believe that immigration from the new member countries of the European Union has had an impact on the rental market.

The ARLA Members Survey was conducted independently during August, with 453 letting offices responding. The survey is backed by the ARLA Group of Buy to Let Mortgage Lenders, Bank of Ireland, Cheltenham & Gloucester, GMAC RFC, Mortgage Express and Paragon Mortgages.