Business is booming for letting agents as more and more tenants seek to let a decreasing number of properties and a lack of supply pushes rents ever higher, according to the latest letting market review from the Royal Institute of Surveyors (RICS).A third (33%) of letting agents are buoyant about the outlook for rents and expect rents to increase next quarter, says the report.

Residential letting agents in London and the East have the strongest tenant demand, but business is growing nationwide.

The RICS report, based on data collected between May and July concludes difficulties in raising a mortgage, worries over a double dip house price recession and out of reach deposits demanded by lenders are leading more people to rent rather than buy a home.

These factors led to 27% more letting agents reporting rents rising for the quarter for a second quarter in a row.

The current state of the lettings market is a far cry from that of a year ago when an over supply of properties to let was pulling down rents and 29% more letting agents were concerned about falling rents.

A new supply of residential letting property coming to the market in any great numbers is unlikely as most investors cannot raise funds to buy due to a lack of money available from lenders, despite interest rates remaining at a record low, making investment an attractive proposition.

New supply of property has fallen for four consecutive quarters, although the fall is decreasing at a slightly slower pace.

A RICS spokesman said: “Supply of lettings property continued to fall in the three months to July although at the slowest pace in a year which amid rising tenant demand has helped propel rents higher for the second consecutive quarter. Existing landlords keen to expand their portfolio may still be struggling to access the necessary finance despite improved market conditions.

“However, there is a possibility the lettings market could face a modest increase in supply in the coming months. The latest RICS Housing Market Survey shows a lack of funding has stifled demand from buyers which may cause some moderation to rents as more opt to let than sell.”