In the United Kingdom, the average rental price rose by 0.5% in July 2010 to £676, which is 2.3% higher than this time last year.

Rents are currently just £12 short of what they were at their peak 2 years ago.

Although the prices of homes in the UK have levelled off, landlords are indulging in the benefits of the insufficient supply of rental property. Those who are currently renting with the intention to purchase a home when they can afford the deposit will find it even more difficult to save money as the rental prices continue to increase.

David Newnes, the Estate Agency Managing Director of LSL Property Services plc stated “Rents are still playing catch-up with the gains house prices made in the last year”. He is not expecting to see a fall in rental prices any time soon and the strong demand for rental property is expected to continue meaning landlords can expect to see healthy returns.

The number of tenants falling behind in the payment of their rents had been at its lowest in two years since the group began collecting data in 2008. The percentage of arrears dropped to 9.2%, a fall from 11.2% at the beginning of the year. Compared to the £361 million worth of rent unpaid in August 2008, this figure dropped to £212.9 million in June 2009. However, with the increase in the cost of renting, there is a risk that once again this figure will rise as the percentage rose from 4.4% in June 2010, to 4.5% in July 2010.

The number of landlords planning to buy property to let has almost doubled, however, this may not be possible for many landlords due to banks being reluctant to provide funding.

A quarterly survey conducted by Paragon Mortgages’ has shown that 21% of the landlords surveyed were planning to purchase buy to let properties in the third quarter of 2010. This is an increase from 11% in the first quarter and 12% in the second quarter of 2010.

With the huge demand for rental properties in the United Kingdom at the moment, it is essential that landlords are encouraged to increase their property portfolios. However, many landlords are struggling to take advantage of the lower property prices and flourishing rental market, as even though the market is currently very strong in the United Kingdom, they are still very strict and wary about giving landlords finance.

Many of the landlords that are willing to buy properties to let are struggling to raise the deposit to do so. According to the Paragon Mortgages’ survey of landlords, four out of ten landlords surveyed that have attempted to secure buy-to-let finance for purchasing or re-mortgage in the second quarter of 2010. Of these landlords, 52% have stated they found it much more difficult to secure finance compared to previous years.