Average residential buy-to-let returns in Britain stood at 13.3% in October, up from 10.5% in September (including capital appreciation and rental income), according to Paragon Mortgages.

The report also reveals that the number of tenants has increased by 22% since 2001 with 3.7m people now living in social housing.

Nigel Terrington of Paragon said: "With this solid demand, rental yields have remained at 6% steady over the past six months despite house price increases.

"We have seen steady activity on the part of residential property investors, who are growing their portfolios in response to additional demand from a variety of different types of tenants, including foreign migrants, young professionals, families and students."