Rents fell during the third quarter of the year as the lettings market was flooded with property that had failed to sell, new figures show.

The Royal Institution of Chartered Surveyors said many frustrated would-be-sellers opted to rent their homes after failing to secure a deal on them, causing the supply of rented property to outstrip demand for the second quarter running.

This helped to drive up the number of surveyors in Great Britain reporting a rise in listings to a new high for both flats and houses.

Overall 50% more surveyors reported seeing a rise in the number of flats that were on the rental market compared with those who saw a fall, while 68% said there had been a rise in houses. But the influx of supply forced down rents, causing them to drop for the first time since April 2003.

The glut of supply left 12% more surveyors saying they had seen rents fall during the three months to the end of September compared with those who thought they had risen - the lowest level since the survey was first launched in 1998.

It was also a sharp turnaround from the previous quarter, when a balance of 31% more surveyors said rents had increased.

London and the South East have been the hardest hit by an oversupply of property causing rents to fall, with 53% more surveyors in London reporting declining rents on houses, compared with rents remaining flat during the second quarter of the year.

Going forward, more surveyors across the country now expect rents to fall than those who think they will rise for the first time since July 2002.

Demand for rented accommodation remained positive during the three months, as potential buyers continued to sit on their hands in the hope of benefiting from further price falls.

But the rate at which demand is rising has eased, suggesting that many people have already taken the decision to rent rather than buy.

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