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A lack of supply is pushing rents higher signalling a revival in the lettings market, says the latest RICS Lettings Survey.

The net balance of chartered surveyors reporting rising rather than falling rents rose from zero to 30 percent -  a marked contrast to April last year when 58 percent more chartered surveyors were reporting falling rents, an all-time low for the survey. 

Surveyors are optimistic that rents will continue to rise with the rental expectations net balance climbing to 36 percent - the highest figure recorded in the survey's history*.

The more positive picture for rents can be attributed, in part, to the continued decline in the supply of both flats and houses in the marketplace. 12 percent more chartered surveyors reported a fall rather than a rise in the number of new landlord instructions for this period. The upturn in the housing market has tempted many of the accidental landlords to sell up with new instructions for sale on estate agents books now rising.

However, one consequence of the turnaround in the rental trend is that the net balance of surveyors reporting an increase in gross yields has turned positive for the first time in a year.

Significantly, demand for property to let remains strong with 30 percent more respondents still seeing it rise than fall, the strongest reading since January 2009. Houses remain marginally more popular than flats but flats are starting re-establish their appeal.

With sellers back in the housing market, supply has fallen back in the lettings sector. This is good news for landlords as rents are set to move higher in the coming months and yield returns are likely to improve. Moreover, the news that buy to let specialists are beginning to lend again may also encourage investors to return to the market.

However, the prospect of higher capital gains tax on the sale of property may in the near term encourage some existing landlords to take advantage of the current more benign tax regime.

RICS spokesperson Jeremy Leaf