Despite rough waters for the UK economy in 2008, the lettings market fared considerably well said the Association of Residential Lettings Agents (ARLA).

Its members found no shortage of new instructions from vendors having difficulty selling their property at the expected price. But towards the end of the year, the market became more unpredictable with rental returns experiencing a variety of regional fluctuations.

With this in mind, ARLA is predicting that 2009 will be both a challenge and an opportunity for the residential lettings market.  Rental demand is expected to remain in place while consumers struggle to finance deals but ARLA predicted stock levels would rise and force rents down.

ARLA is also predicting the UK property market would become stronger by the end of year. It claims that property remains a solid long-term investment but warns of patchy returns around the country, particularly in the first half of the year.

It said 2009 could be a tough year for investor residential landlords feeling the repercussions of lender illiquidity and tougher mortgaging policies. ARLA is predicting there will be an increase in landlords defaulting on their monthly mortgage payments over the coming months, and an increased rate of repossessions as a result.

However, ARLA expects to see a revival of the buy to let market by the end of next year. Ian Potter, Operations Manager of ARLA, said: “With house prices continuing to fall, we’re expecting to see a good deal of investor landlords enticed back into buying up properties, as they recognise that bricks and mortar are still the most solid long-term investment.

“This adage is particularly apt when considering the prospect of further falls in interest rates that will impinge on savings accounts.

“I’m also hopeful that many of the ‘reluctant landlords’ we saw entering the market as a result of falling house prices will be encouraged by their rental returns and see the benefits of buying to let. All the market needs is a bit of confidence and then we will see it become freed up and stock moving again.”