Rent rates could rise by as much as eight per cent by the end of the year, according to analysts from upmarket property company Savills, Clear Property Investment heard this week.

And they could be set to rise a further seven per cent in 2011 and 2012. The picture - an optimistic one for landlords - is due to a national imbalance in property supply and demand.

A lack of willingness by bank managers to lend, less affordable housing on the market and an increase in the number of people facing the stark reality of unemployment has grown sharply, especially since the beginning of the year.

Estate Agents Countrywide has seen a 16 per cent rise in tenants signing up with the company since January 2010. In June 18,000 new customers walked through their doors - the highest rise since records began in 2003. Meanwhile the availability of rented accommodation fell six per cent over the last three month period.

Savills' Yolande Barnes told FT.com she reckoned the UK was looking at a shortfall of 1.138m homes in five years time and blames current planning and industry practices.

Meanwhile the National Landlords Association (NLA) recently revealed the average rent arrear was £800 - compared to £1000 in January 2010.

An NLA spokesman welcomed the latest encouraging statistics but warned: "Tenants and landlords must communicate and work together to tackle financial problems before they result in a loss of rent or even the tenancy." *

At the moment landlords of one-bedroom flats are enjoying the most profitable yields. But this market is expected to become crowded pretty quickly with family housing such as three-bedroom properties eventually proving more popular, particularly in the South of England.

Meanwhile buy-to-let investors last year enjoyed a 7.6 per cent return on their annual investment in 2009 - nearly £13,000 on average.

The figures, from LSL Property Services, showed a predicted 9.8 per cent - or £16,000 return - for this year.

LSL Property Commercial Director David Brown said: "Despite the worst recession in living memory, and despite house prices continuing to fall for the first few months of 2009, investment returns in buy-to-let were very respectable...brave landlords who added to their portfolios will be celebrating an excellent year."

For further advice on investment returns contact any of our Clear staff.

* Landlords having difficulties chasing up tenants can take advantage of a new online service from the NLA. The organisation's Rent Recovery Team will contact tentants, serve notices and organise possession proceedings.

View other news from July 2010