Marginal falls in rental returns for houses and flats are reported in the latest quarterly survey of ARLA’s member letting agents. This, ARLA believes, is due to the number of new developments coming on-stream. The Association also points out that this demolishes the myth that rent levels are soaring.

Demand for rental property still outstrips supply in some areas, with the proportion of letting agents reporting this imbalance at its highest in Greater London and the South East, followed by Prime Central London and the rest of the country. Overall, the proportion of agents reporting more tenants than there are properties available to rent remains at a historically high level of 39 percent. However, average weighted rents for houses are down by 7 percent and for flats by 9 percent.

Ian Potter, Head of Operations for ARLA, said: “We are seeing corrections in individual locations throughout the country. The main cause of these is the developments of new blocks of two-bedroomed flats coming on-stream.

In many places this has had a positive effect as it has allowed the rental market to provide stability in housing at a time of volatility in the sales market.

“It also demolishes the myth of soaring rent levels. As before in volatile times, the rental market is proving to be the white knight for housing as a whole.”

Average rents for a house range from £3,000 a month in London to £931 a month outside the South East. For flats, the rental difference is £2,000 a month in central London, £854 in the South East and £585 a month elsewhere.

The ARLA survey shows that most investment landlords (77 percent) are marking time and neither selling nor buying.

The average capital asset values of rented houses have fallen by 2.4 percent in Prime Central London, 1 percent in the rest of London and the South East and 5.1 percent in the rest of the UK. For flats, average values rose in the South East by 0.9 percent while falling 3 percent in Prime Central London and 8.1 percent in the rest of the UK.

The average values of rented houses are £800,000 in Prime Central London, £336,900 in the rest of the South East and £223,500 in the rest of the country. Rented flats in Prime Central London have an average price of £486,300, compared to £213,000 in the South East and £149,400 in the rest of the UK.

Void periods have continued to shorten. This quarter they have fallen from 24 to 22 days. Tenants are still staying in properties for longer for an average of 16.3 months against 16.1 months in the previous quarter.

They stay the longest in central London at 17.3 months. In the South East they stay for 16.8 months and for 15.4 months in other areas. 17 percent of all tenants are immigrants.

The ARLA Survey of Letting Agents claims to be the largest independent survey of its kind conducted in the Private Rented Sector and is supported by the ARLA Group of Buy to Let Mortgage Lenders: Bank of Ireland, Cheltenham & Gloucester, GMAC Residential Funding, Mortgage Express, NatWest and Paragon Mortgages.

The Second Quarter 2008 survey was drawn from 444 responding lettings offices.