Outer London reported 4.8% of rental yields – the annual rental income as a percentage of property value – while Central parts of the capital saw yields of 5.2%, less than the national average of 5.6%.
The highest yields, 6.1%, were reported in Yorkshire and the Humber.
Out of the nearly 2,000 landlords surveyed, 17% reported yields between 3% and 4%, while one in 10 landlords earned 10% or more.
Despite the low rental yield figures, London had the second largest increase in levels of tenant demand, rising to 48% from 42% year-on-year.
Overall, two fifths of landlords reported increased tenant demands in the third quarter of this year.
On a regional basis, the East of England has seen the greatest increase at 52%, and the North East the lowest at 31%, however, the region saw a 23% increase compared to the same period last year. The national average was 41%.
John Heron, director of mortgages at Paragon, said the figures reflect a steadily improving economic outlook for the UK as a whole, and that yields have remained stable throughout the year.
“Q3’s data shows London and the South East slowing down somewhat, while yields in the regions are growing. This represents a welcome rebalancing of the national economy, with some of the heat from London’s economy escaping the M25 and being distributed around the country.”
Mortgage Solutions reported in July that landlords on average were earning less money per property in the first two quarters of 2015 with average drop between 0.6 to 1.6 percentage points across three different sectors of the market. The only sector to see yields increase was multi-unit freehold blocks, rising 0.8 percentage points.