The supply of rental properties is increasing, according to the latest report from the Association of Residential Letting Agents (ARLA), with the average letting agency managing a total of 189 properties in July, compared with 178 in June.

Demand for rental property decreased slightly, with an average of 35 prospective tenants registered per letting agency branch in July, compared to 36 in June.

ARLA says that a quiet summer period resulting in a slight dip in demand is good news for the industry, representing a step in the right direction for balancing supply and demand.

Regionally, however, demand in London continued to rise, with 40 prospective tenants registered per branch in July, compared to 36 the previous month.

A third of agents surveyed by ARLA said they expect rental supply to continue to increase over the next five years.

What’s more, 37% of respondents said they perceived rents to have increased between June and July, the highest proportion recorded since ARLA began reporting in January.

“Following the changes to pensions made in April, the fact that a third of agents are predicting supply will continue to increase over the next five years could be a result of people releasing equity from their pensions to invest in the buy-to-let market,” says David Cox, managing director of ARLA.

“It’s clear that the growing gap between supply and demand is an issue still rife in the capital; which doesn’t look to be improving any time soon. With the cost of renting continuing to rise month by month, it’s a worrying state of affairs for those hoping to save for their first house and just pushing the aspiration of owning a home further out of reach,” he adds.

Meanwhile Peter Cowen, lettings director at Yorkshire estate agency Manning Stainton, says that today’s market is still reacting to the financial crisis, when a surge of property came on to the lettings market in response to a challenging sales market.

“As we progressed into and through 2014 we began to see a change and recovery within the economy and this quickly filtered through to selling homes and since October 2014 selling your home has become much more achievable,” he says.

“This momentum change in the sales market has without doubt affected the number of new properties coming into the rental market and this is very much a situation that a great many agents report. So far this year our Lettings centres have registered over 6000 tenants looking for their next home with most of our properties lettings within days of coming to market.”

Cowen adds that now remains a favourable time for landlords who are benefiting from a choice of tenants as well as increasing rents.

“For tenants the pressure is firmly on to start their search early, have clear search criteria and must ensure their next move is an affordable one,” he warns.