Average rents have risen a reassuring four percent in the last quarter, according to FindaProperty.com’s latest report.
And with the Bank of England warning of a coming mortgage famine, landlords could be see the number of first time buyers priced out of the market and heading for rented accommodation rise even further.
Rental prices asked for by landlords on findaproperty.com had fallen more than six percent between early 2008 and the beginning of this year.
But with a jump from £804 in January to a current rental of £839, experts predict the rental market is due another surge.
Nigel Lewis, property analyst at FindaProperty.com, said: “Rents have gone from strength to strength during the first half of 2010.
“The resurgence of the sales market has left tenants short of options and the result has been increasing rental prices.
“We're beginning to creep towards the equilibrium between stock levels and prices at which the market is perfectly balanced and neither party - tenant or landlord - can claim negotiating rights.”
Lewis believes demand for rental property will stay this strong as long as the lending market remains subdued and would-be buyers are unable to secure they mortgages they need.
He added: “Despite new lenders entering the market and more mortgages becoming available it's unlikely that we’ll see floods of new buyers suddenly securing mortgages.
“It’s up to the private rental sector to provide the safety net. If things continue at this rate, though, we can expect asking rents to soar.”
Findaproperty.com puts the rise in rents down to what they believe is a growing confidence among workers in the financial services sector.
This, claims the website, means demand for property where those workers live has flourished.
Findaproperty's study shows average rents have risen more than 6.4 percent to £1,729 in London in the past year compared to a five percent fall in Manchester.
Within the capital, it’s the banker boroughs that have seen some of the biggest increases, with the City of London up an impressive13.3 percent and Kensington and Chelsea up 12.7 percent.
Meanwhile the Bank of England says the problems with mortgages, and the ever-real fear of a double dip recession, is seeing a growing reluctance in banks to lend to each other.
Melanie Bien, of brokers Private Finance, said: "Fears of a second credit crunch are growing among lenders.
“Mortgage availability is already tight as funding conditions remain challenging, but with some support schemes ending from next year, there are further problems ahead.
“Any replacement funding will be more expensive, which could make it harder for those looking for a mortgage.”
David Hollingworth, of London & Country, said of the new report: “This is a warning shot that we are a long way from being out of the woods.”
According to Bank of England figures, house purchase loans are currently running at around half the norm.
Michael Coogan, director general of the Council of Mortgage Lenders CML), said: “The withdrawal of funding support through the special liquidity scheme, combined with the competition for retail savings and the continuing uncertainty about wholesale funding markets, can logically be expected to have a material impact on lending in 2011 and beyond.”
