Strong demand from people who are putting off buying their own home helped push up rents during May, figures have shown.

Average annual rental incomes among buy-to-let landlords rose to £8,930 in May, 2.15 per cent higher than the previous month's figure, according to specialist lender Paragon Mortgages.

This helped keep annual rental yields firm at 7.98 per cent of a property's price, despite the average value of an investment landlord's property rising by 2.1 per cent to £111,972 during the month.

John Heron, managing director of Paragon Mortgages, said: "Buy-to-let is looking steady as tenant demand builds and landlords continue to invest.

"This is good news for landlords but also for the large number of prospective tenants who will benefit from more choice and quality in rented accommodation.

"The rental market is awash with people in their 20s and 30s who are delaying their first home purchase and going the rental route."

Unsurprisingly, the highest rental yields were in areas where property is cheapest, with investment landlords in the North reporting yields of 10.64 per cent on properties costing an average of £52,639, while in Yorkshire yields averaged 10.28 per cent on properties valued at £67,106.

But at the other end of the scale landlords in Greater London were getting returns of just 6.76 per cent on properties valued at £207,568, while in the South-East yields averaged 7.36 per cent on properties worth £133,946.

The East Midlands is the best place to invest in terms of both rental income and property price rises, giving an overall return of 59.55 per cent during the past year, followed by East Anglia at 51.38 per cent.

But Yorkshire and the North gave total returns of just 9.73 per cent and 14.74 per cent respectively once rises in the value of a property were taken into account.

The average yield across England and Wales on a property bought a year ago was 27.37 per cent, equivalent to £25,896.

Terrace properties remained the best investment giving annual rental yields of 9.36 per cent, followed by semi-detached houses at 8.38 per cent, while flats returned 7.41 per cent.

Tuesday June 17, 2003