Demand for rental property will continue to outstrip supply for much of 2011 and into next year, according to the Association of Residential Letting Agents (ARLA).

“The lack of new rental stock for the private rented sector (PRS) was the dominant factor in the market last year, and will continue well into 2012 because of the broader issues of diminishing housing supply and lending drying up,” said Ian Potter, operations director of ARLA.

“The Leader of the Labour Party, Ed Miliband, recently flagged research that shows 41 per cent young low-to-middle earners live in privately rented accommodation compared with 14% in 1988. This trend looks set to continue while mortgages are so hard to come by and the capital barriers to home ownership appear so entrenched.”

The majority of ARLA member offices (59 per cent) believe that demand for rental property will continue to outstrip supply in 2011. Almost four in ten ARLA offices believe that more private landlords will enter the market over the next 12 months.

Ian Potter continued: “The PRS is taking on the burden created by diminishing housing supply – a trend that will continue for the short to medium term. According to our research, this issue has been identified as UK-wide by our members but particularly pronounced in the south east and London.

“Therefore with more consumers depending on rental properties and new landlords coming to market, the Government must act now to address the quality of the PRS housing stock. This means incentivising renovation, improving options for sustainable refurbishment, and introducing regulation to stamp out bad practice. The Budget would be a perfect place to start!”

ARLA members are cautiously hopeful that government intervention may lead to an improvement of the PRS – more than six out of ten ARLA member offices (61 per cent) think that the quality of rental property will remain the same in 2011 but a minority of slightly more than a quarter (26 per cent) think quality will improve.