Strong demand from people who are priced out of the property market helped push rents up during June, figures showed yesterday.

Rents charged by private landlords rose by 2.8 per cent last month to average £9,133 a year, up from an annual total of £8,930 in May.

Specialist lender Paragon Mortgages said this was the biggest jump for ten months and added that rents were now 5.2 per cent higher than they had been this time last year.

At the same time the average price of a buy-to-let property rose by 5.5 per cent to £117,902 as the housing market continued to pick up.

But the increase in the cost of property pushed annual yields down by 2.6 per cent to 7.8 per cent of a property's value.

John Heron, managing director of Paragon Mortgages, said: "Since March this year, landlords have enjoyed steadily rising rental incomes, helped by strong and sustained demand from tenants, many of them prospective first-time buyers.

"To meet this tenant demand, they have been building up their portfolios and have benefited from a slower market for owner-occupiers, enabling landlords to snap up homes at very attractive prices.

"More recently, with market activity picking up, bargain house prices have been more difficult to achieve and this is reflected by the high 5.5 per cent house price rise recorded this month."

The North is now the only region where landlords achieve double digit yields, with yields in the area averaging 10.5 per cent on properties costing an average of £51,779, while in the North-West yields are 9.6 per cent on properties worth £80,615.

At the other end of the scale, yields in East Anglia are just 6.6 per cent on properties costing £98,223, while in Greater London they are 6.8 per cent on a property worth £206,283.

In overall returns, taking into account rental income and increases in a property's value over a year, the East and West Midlands have been the best places to invest, giving total returns of 56.5 per cent and 64.7 per cent respectively.