Surveyors predict 3.9% rise in rent

The financial squeeze on tenants looks set to continue, with rents predicted to rise by nearly 4% over the next year.

Rents have already increased by 4.3% over the last 12 months and are likely to be driven further upwards by a "scarcity" of mortgage finance and a shortage of good quality properties for tenants to move into, the Royal Institution of Chartered Surveyors (Rics) said.

Chartered surveyors predict rents will rise by 3.9% on average across the UK over the next 12 months, the body's residential lettings survey for the second quarter of this year found.

In the three months to July, the amount of new properties coming on to the market was little changed, the study found. But demand among tenants is continuing to grow and it has outpaced the change in supply since the first half of 2009, although the gap has recently narrowed, Rics said.

The study also uncovered strong regional variations. The North West saw rents increase by the biggest margin with a 6.9% rise whereas surveyors in Wales reported that rents had remained at the same level over the past 12 months.

Peter Bolton King, Rics global residential director, said: "While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords.

"However, it is clear that we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders. These barriers to home ownership need to be addressed alongside the shortage of new stock coming to the market."

Rents have soared in recent months as would-be buyers have remained trapped in the rental sector because they cannot raise a deposit or meet lenders' toughening mortgage criteria.

Suggestions have also been made that many people are choosing to rent because of uncertainty surrounding the housing market.

The Council of Mortgage Lenders (CML) said on Thursday that buy-to-let lending has increased by nearly a fifth in the space of a year amid strong growth in the rental sector, although volumes remain at about a third of their peak in 2007.