Rents for residential properties were up +11% in April 2010 compared to the same month in 2009, according to Ludlowthompson.

The reasons for the increase are attributed to the shortage of supply in rental property caused by the lack of new-build property in the pipeline as well as a lack of funding and accidental landlords withdrawing their properties as they look to sell up.

Stephen Ludlow, director of Ludlowthompson, said: “The rapid recovery of the London jobs market and a significant lack of private rental properties are combining to force up rents.

“During the recession, rents fell to historically cheap levels because landlords were willing to take lower rent to keep good tenants in place. A lot of tenants, particularly in the young professional market, are now happy to pay a bit more to keep a flat they like or to upgrade to a bigger property or better location.

“Rents could go higher if the job market continues to recover, particularly if there is still a shortage of private rental properties. A lot will depend on how the next Government handles the economy.”

Residential property investment gave a total return of 11% in 2009 which when compared to the 3.5% achieved from commercial property, clearly indicates that residential property is a better investment especially as it has consistently outperformed commercial property for nearly a decade, according to IPD.

Ludlow said: “It may upset all the pundits but residential property has proved yet again to be a top-performing asset class. With rents increasing and house prices now having reached a floor it’s a great time to invest in buy-to-let, particularly when investors can get a low interest rate on the mortgage by putting down a big deposit.”