Rents are rising but new instructions to let properties are in decline, according to the latest housing market research.

A survey from the Royal Institution of Chartered Surveyors (Rics) shows growth in demand for lettings in the last quarter of 2007 is now below the survey’s long-run average rate.

New instructions to let properties declined for the first time in the survey’s history, which the report attributes to the credit crunch in restricting the number of buy-to-let mortgages being approved.

Gross yields are increasing however, and as a result of strong rental growth and falling house prices gross yields increased at their fastest pace since Q3 2005.

Houses were more popular than flats in the fourth quarter, with a one per cent fall in new instructions for flats compared to a nine per cent rise in new house instructions.

The rise in yields in the fourth quarter may have been one reason why the percentage of landlords selling their properties at expiry of tenant lease fell from 6.5 per cent (in the previous three-month period) to 4.6 per cent, the lowest since the second quarter of 2006, Rics said.

Tenant demand growth was strongest in the east of the country and the south-east, while in London and the north it was weakest.