London landlords are seeing more than double the average returns across the country amid surging property values and a continued shortage of homes to choose from, a lettings network has reported.
LSL Property Services, which owns chains Your Move and Reeds Rains, said the capital's landlords have seen annual returns of over £38,000 typically over the 12 months to January, made up of income from rents as well as the rising value of rental property in London.
Across England and Wales, the average return for landlords over the last year has been £14,767, with the North East recording the lowest average return at £7,271.
LSL predicts that if current trends continue, landlords could expect to make an average return of around £22,256 per property over the next 12 months, helped by rising rental property values and smaller periods when properties are standing empty between tenancies.
David Newnes, director of Your Move and Reeds Rains, said that demand remains strong in the rental sector despite signs that more people have been getting on the property ladder in recent months.
"Such equity growth is also an important factor for some landlords looking to remortgage existing properties to fund new purchases... many landlords will continue to expand their portfolios."
LSL, which bases its study on rents achieved on more than 20,000 properties, said rents rose by an average of 1.4% over the 12 months to January, to reach £742 a month on average. On a month-on-month basis, there was a "small seasonal fall" in typical rents of 0.4%.
Mr Newnes said that while rents are now rising more gradually, there is still a "severe mismatch" between the number of homes being built and the number of households looking for somewhere to live.
The South West has seen the steepest year-on-year rise in rents, with a 3.7% increase taking them to £662 a month on average. This was followed by a 3.2% annual increase in London, where average
rents are now £1,121.
Rents in the East of England have seen the sharpest fall over the last 12 months, with a 3.6% drop taking them to around £718. In Wales, rents have fallen by 1.5% over the last year to reach £551 a month on average.
Tenant finances improved in January as the squeeze on household budgets eased. Around 7.4% of all rent was late or unpaid in January, down from 9.7% over the Christmas period in December.
Mr Newnes added: "Tenants in good financial shape are good news for landlords... as the chance of late rent declines, the risk associated with such returns is improving dramatically."