Rental prices in the UK look set to increase because there are ‘simply not enough properties to meet demand’, a new report shows.

As demand for property continue to rise, the number of homes coming on to the market remains at a historical low, the new joint report into the letting market by Reapit and Dataloft shows.

The study shows that the letting market is seeing substantial activity with viewings up 13.3 per cent year-on-year and lease signings up 3.5 per cent, while supply has dropped 6.9 per cent.

The supply problem has been compounded by changes to the buy-to-let tax regime which have cut into landlords’ profit margins, leaving many with little alternative but to exit the private rental sector due to the profit squeeze.

Gary Barker, CEO of Reapit, said: “There are strong market indications that upwards of 10 per cent of landlords are actively considering selling their properties.

"Multiple vendors have reported similar information, and we are actively tracking this phenomenon.

“Our research has uncovered an imminent supply-side squeeze in the rental market. We see strong demand for properties with viewings up 13.3 per cent and lease signings up 3.5 per cent over the year, while overall supply is down 6.9 per cent.

"Rents are unchanged year on year, but as rental inventory dries up, it’s inevitable that rental prices will increase.

“Landlords deciding to sell their properties will further squeeze the supply-side of the rental market. There are simply not enough properties to meet demand.”

The ‘Residential Real Estate Demand Monitor - Rental’ report, a quarterly analysis of the UK’s residential property rental market, combines data from a representative sample of lettings agency branches across the UK.

Richard Truman, Head of Operations at Simple Landlords Insurance, added: “Our own research shows that with all the changes in the market, there are still more people who see an opportunity to expand than sell up – 11% vs 7%.

“Where people do sell-up, there’s real opportunities for growing property investors to snap up bargains. These are the ‘emerging landlords’ working the environmental and market challenges into their strategy.”