Rents are forecast to rise by more than 20% over the next five years as the falling number of new landlord instructions persists, according to the Royal Institution of Chartered Surveyors (RICS).
The surveyors' latest monthly residential property market survey found that the number of landlord instructions dropped by 10%, the weakest reading in over two years.
RICS estimate that this trend will continue for the foreseeable future as changes to mortgage interest tax relief from next month have an adverse impact on investment levels in the buy-to-let sector.
But while new housing supply in the private rented sector falls, demand for rental accommodation looks set to increase further and it is this widening supply-demand imbalance that is likely to place upward pressure on rental values.
Rental prices look set to increase faster than house prices over the next five years, RICS said.
When it comes to home prices, chartered surveyors said that they anticipate an increase of about 18% over the next five years.
Reflecting on RICS' survey, Stephen Wasserman, managing director of West One Loans, said: "The persistent supply versus demand challenge plagues the property market, with landlords looking to capitalise on strong demand having to overcome sustained supply-side issues.
"The changes to buy-to-let taxation are likely encouraging some to put the brakes on their investments but, with many hungry renters, landlords shouldn't walk away completely."
Perseverance in the buy-to-let market is likely to "deliver results" for landlords, according to Wasserman, who reports that a growing number of professional landlords are switching to buying through limited companies and other methods to mitigate the tax changes.
"The government and private sector are working to rectify the supply issue, but this will take time and there are opportunities for investors in the interim too," he added.
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