TENANT demand in the South East is rising at its fastest pace for five years, according to the Royal Institution for Chartered Surveyors (RICS).

RICS' latest letting survey indicates demand remains the strongest for flats as prospective first-time buyers still struggle to get on the property ladder, despite a subdued sales market.

Levels of new available rented property have also picked up after stagnating in the last quarter, though the increase is mild in line with the previous six months.

Increasing rents continue to lift gross yields for the second consecutive quarter. However, the renewed growth in new investor instructions will increase the supply of available property and has led surveyors to dampen their outlook for growth in the sector.

More buy-to-let investors continue to enter the market. The research suggests that landlords are also less likely to sell when tenants’ agreements expire.

Landlords are exiting the market at half the rate of this time last year.

Trevor Hines, RICS South East regional director, said: "The return of buy-to-let investors to the market is a result of expectations that interest rates have peaked.

"They may also have been encouraged by the fact that the housing market, though subdued, has not collapsed, despite fears it would do so."

"August’s interest rate cut is unlikely to reduce tenant demand as tough affordability means renting remains the only realistic option for many people in the South East."

Average rents per calendar month in the South East:

One-bed flat - £600
Two-bed flat - £700
Two-bed terrace - £750
Three-bed semi - £900
Four-bed detached - £1,275
Average - £759