According to LSL Property Services’s latest Rental Index, residential rents have risen by +1.4% in August 2009, which is the fastest growth since July 2008 and follows on from increases in the previous two months, with UK rents having risen +8.2% over the third quarter.

The average UK rent is now £661pcm, still -4% below the peak of August 2008. Rents rose in every regions except Yorkshire and Humberside and the East Midlands.

David Brown, commercial director of LSL Property Services, said: “Sharply lower supply of rental housing, strong tenant demand and greater confidence among landlords are pushing rents sharply higher. The stock of accidental rental housing is diminishing more and more quickly as the housing market thaws.”

In Q3, house prices, according to LSL, have recovered by +2.9% causing yields to slip fractionally from their peak in April of 5.1% to just under 5% in August, but remain well above the 4.2% achieved at the end of 2007.

Brown said: “Of course, if house prices continue to outstrip rent rises, landlords should expect yields to fall, but overall the rental market looks like a very solid investment for those who know what they are doing.”

In contrast there was a sudden increase in tenants getting behind with their payments. Arrears rose in every region except Yorkshire and the Humber. Wales was the worst performer. In total, 17.4% of all UK tenants did not pay on time, up from 15.3% in July.

Brown said: “By far the largest increase in arrears was among those who just missed by a few days probably because they were trying to manage holiday cash flow. The number of serious offenders who were more than 60 days late only rose +3% in the month. We would expect to see a sharp improvement in September.”