Rental rates on buy to let properties have soared to £701 a month, setting a new record high.
The rise of 0.7% in June is up a further £5 from May’s figures.

To give the annual picture, the average buy to let rent has risen from £673 in June 2010: an increase of £28.

Yields are also creeping up.  In June they were 5.2%, compared with 5.1% in May.

London rents have meanwhile broken the £1,000 mark to hit an average of £1,006 per month in June, a rise of 6.9% on 2010’s figures, according to the latest buy to let index from LSL Property Services.

Rental values are also rising rapidly in the West Midlands (up 2% on May) and Eastern England (1.6% higher than last month).

The rising pattern does not however apply nationally. Some areas of the UK were affected by drops in rental incomes: the East Midlands, the South East and Yorkshire & Humber were all down by 0.5%, 0.2% and 0.1% respectively.

David Brown, commercial director at LSL Property Services, notes that tenant demand is outstripping supply, with not enough new rental properties entering the market:  “In the long-term, there is an even smaller chance of a significant slowdown. Excess housing demand will be driven into the private rental sector, pushing rents up further.”

He explained that rents are also being forced upwards due to the drop in the number of mortgages being granted.

Rental arrears are on the slide, with 9.3% of June rents late or unpaid – a drop of 2.2% on May from £315 million to £257 million.

“Tenant finances took a turn for the better in June. We tend to see an improvement at this time of the year – and witnessed a 5% drop this time last year,” said Brown.

However, Brown warns that a change in landlord behaviour is also to blame:  “With rents rising so quickly, many landlords are being less forbearing with tenants showing signs of payment difficulties, and are looking to replace them in expectation of higher rental income,” he said.