How will the rental sector look in 2012?

Throughout last year, while the market for properties for sale stalled at various points throughout the 12 month period, the market for private rental homes remained remarkably high, performing admirably for landlords throughout the entirety of the year as rental demand and prices continued to creep up.

LSL Property Services, which releases month-by-month figures for rental properties and their prices as part of its Buy-to-let Index, said in November that prices in October for rental homes had hit a record high, when they averaged £720 per month.

Not only was this a high for tenants that continued to hit them hard in the pocket, but it also signalled the ninth consecutive month where property prices in the private rental market continued to increase, with demand going up during that particular month, the company said.

In fact, it was not until December, when the figures were presented by LSL Property Services, that tenants were finally given a slight reprieve, with prices for renting dropping by 0.4 per cent to £717 per month, and only London, the south and Yorkshire showing an increase in rental prices throughout November.

The Association of Residential Letting Agents (ARLA) has said that demand has continued this trend, as it said that many of its members were now seeing the rental market be "all over the place" thanks to a severe shortage in the number of rental properties currently on the market.

It predicts that this means there will be a continuation of the upturn in property prices which were seen overall in 2012, with chief executive Peter Bolton King saying that there could be a rise in prices in certain places, but not all of them.

"You could get areas where there is a surplus of city centre flats, for instance, where you will find that rents are going to have to be competitive. Because people have no option at the moment - they can't necessarily buy a property and can't get a mortgage - they are having to rent and therefore I think that the rental market in 2012 will continue to move forward."

There has, however, been a slight change in the way the rental market is performing as a whole as we come into 2012.

According to the latest report from ARLA, there has been a serious drop in the number of people who are looking to move into rented accommodation in the final months of 2011.

This, it says, was seen through the fact that only 55 per cent of its members were reporting at the beginning of this quarter that demand for property was still outstripping supply. According to ARLA, this was a significant change from the three month period prior, when the demand for property was greater than the number of rental homes available for 74 per cent of its members.

Could this be a trend which continues throughout 2012 though?

Tim Hyatt, president of ARLA, said: "The apparent drop in demand for rental properties could be due to the traditionally quite pre-Christmas period. At the same time, it could indicate a reversal of the surge of new tenants who turned to the PRS when they could not afford to buy."

However, despite there being some concern among landlords that the number of people looking for properties is going to fall, Mr Bolton King said that the market should recover, and said the NAEA had no fears that the demand for UK property to rent would remain strong.

"We are going to get these fluctuations, but generally the demand is there for rental property and that is not going to disappear. All of the research that has been done shows that over the next ten-plus years the growth in the private rented sector is going to continue. It has to because we have got an increasing number of households for various reasons and that is not projected to be met by the owner-occupier sector, so there is going to be continued growth in the private rented sector," he said.