The average rent in the UK rose by +0.5% to £667pm in May, according to the latest Buy-to-Let Index from LSL Property Services.

According to the LSL data, rents have now risen for four successive months and are +2.7% higher than a year ago. Yields on buy-to-let properties remained at their highest level since December 2009 at 4.8%, as rents accelerated faster than house prices. The house price for the average rental property rose by +0.1% compared to April, and registered an annual increase of +8.6%.

David Brown, commercial director of LSL Property Services plc, said: “House price increases have steadied, and rental income is now accounting for an increasing portion of a landlord’s total return.

“With the government likely to raise capital gains tax, capital gains may no longer be taxed more lightly than rental income. These measures could reduce the attractiveness of investment in the private rented sector, which would be a step backwards from financing the UK’s housing shortfall. But such a move would at least encourage landlords to take a more balanced view of rental income and capital gains in the sector. Total annual returns are being boosted by strong capital gains, but it is rental income that makes an investment plan viable and pays a landlord’s mortgage.”

The LSL data shows that the total return from investing in buy-to-let over the last twelve months was 13.2% in May 2010, rising from 12.8% in April. The average landlord would have made £20,363 in the past year – a combination of £7,100 in rent and with an average capital gain of £13,263.