As the owner-occupier market cools, the private rentals sector is flourishing with an increase of nearly 20 per cent new tenancies over the last three months.

According to the latest Association of Residential Letting Agents’ quarterly survey, 41 per cent of central London agents who were quizzed say demand from tenants is outstripping the number of properties on their books.

The survey also shows that the values of houses to rent in prime central London rose by 8.3 per cent, although in the rest of the South East they fell by 4.3 per cent and by 2.2 per cent elsewhere in the country.

The values of flats to rent rose by 13.7 per cent in prime central London and, away from London and the South East, still rose marginally by 0.4 per cent. In the South East, away from London, values fell by 4.6 per cent.

Ian Potter, ARLA’s head of operations, says: “This steady rise in rental growth that we have seen yet again, coupled with clear evidence that there is no unusual selling, proves once again that the credit crunch effect on the private rented sector exists only in the imagination. This is underlined by the short void periods and length of time tenants stay in rental properties.”

The average time rental properties are empty remains short, at an average of four weeks or less a year. On average, tenancies are lasting for well over 18 months in London.

Rents have increased moderately over the last six months, with prices from £799 a week for houses in central London and £532 for flats.

All areas report that there are properties, mainly houses, coming on to the rental market because they cannot be sold. However, as yet, the number is unquantifiable. Meanwhile, 84 per cent of ARLA members believe that immigration from the new member countries of the European Union has had an impact on the rentals market.

Tamara Hunt, head of lettings in London for Strutt & Parker, notes a good number of applicants registering and the market doing well for the time of year. “Prices for new applicants seem to be holding at the moment, but prices for renewals are showing signs of falling back. We are getting more requests for reductions from tenants who are looking to extend their tenancies.”

Instructions are still plentiful, with a lot more stock than this time last year, adds Hunt. “Landlords are unlikely to see rent rises this time around, given the amount of choice for prospective tenants.”