The number of new tenancies agreed has soared by 20 per cent in the past year, the latest Sequence National Rental Report for November has shown.
The report found that UK rents, excluding London, have increased by four per cent to reach £713 in the past year while a month-on-month seasonal dip of one per cent was noted.
Tenant demand is up by 14 per cent on an annual basis while supply has dropped by 17 per cent, meaning six tenants are chasing every rental property up from less than five a year ago.
In London, average rents have increased by six per cent annually to £1,580 although a seasonal drop of one per cent on the month was also noted.
Demand in the capital is significantly higher than in the rest of the country, with 11 tenants chasing every new rental property that comes onto the market.
This has also increased from a year ago when – although still high in relative terms – less than ten people were chasing each property.
There are plenty of opportunities for property investors and buy to let landlords to take advantage of this demand, although high property prices in some locations will limit the returns on offer.
“Demand for rental properties has increased dramatically, up 14 per cent annually due to many would-be buyers being priced out of the property market,” said Stephen Nation, head of lettings for Sequence.
“This is resulting in a soaring number of new tenancies, which are up by a fifth on the year and the competition for properties has driven up rents.”
He added that the trend in London is “even more acute” and that demand in the capital is up 57 per cent annually.
Meanwhile supply in London has declined by 10 per cent, meaning the level of tenants chasing every property is at its highest level for more than three years.
Mr Nation added that buy to let mortgage applications had declined by six per cent compared to last year, although the market was particularly strong then.
“To put the market into context, current application levels are still 46 per cent above October 2012,” he added.
“While interest rates are not predicted to rise for some time and we continue to see strong tenant demand growth and rising rents, investors will continue to be attracted to this market.”
If you are interested in the yields for different property types please take a look at our latest complex buy to let index for Q3 2014.