Its buy-to-let index showed that annual inflation was 4.2% in July, with average rents up £29 a month on July 2010.
However, the rate of increase has slowed, with average rents increasing just 0.6% over July to £705 compared to June’s average of £701.
Average yields were also up on last year at 5.2% in July compared to 4.8% a year ago. Yet, total annual returns fell to 1.2%, as the effect of falling rental property prices undermined strong yields.
Nevertheless, tenant arrears fell for for the third consecutive month to 9% of all UK rent, down from 9.3% in June. Unpaid rent totalled £251m across the UK in July, down 2.4% from the £257m unpaid in the previous month.
Regionally, rental prices rose fastest in London in the year to July, increasing by 7.1% to a record high of £1,009 a month.
This was followed by the North East and the East and West Midlands, which both saw increases of 4.8%.
The only region not to experience a rise in the past year was Wales, where monthly rental prices were static at £547.
David Brown, commercial director of LSL Property Services, said: “Rents are on an upward trajectory, and it is unlikely that tenants will gain respite any time soon. Demand from thousands of frustrated buyers each month is underpinning buoyant competition for rental homes, enabling landlords to increase prices.”
He added: “Such strong demand and high rental incomes has forced lenders to take notice and more are returning to the sector.
“As a result of the competition in the buy-to-let market, the range of affordable products is expanding and lending to investors rose by 21% in the last quarter. Nevertheless, even with squeeze on landlord finance abating, the new supply will not be enough to meet demand from tenants.”
However, Brown said the increasing cost of rental accommodation, alongside the soaring cost of living, was eroding first-time buyers’ ability to save deposits.
“First-time renters are also keenly feeling the pinch. As rents climb, so does the size of the average deposit a new renter must find. Thousands of new buyers each year rely on the bank of mum and dad to help fund a deposit.
“However, now it is becoming increasingly commonplace for renters to get parental help to fund their first deposit on a rental home, with the typical one-month deposit on a property in London more than £1,000.”
