August led to a sharp rise in tenant arrears for many landlords, according to LSL Property Services with arrears totalling £266.3m, or 11.3% of all rent in the UK. This is up 25% from £212.9m (or 9.2%) recorded in July.

The research shows the largest increase in tenants arrears was in the North East of England, where unpaid rent rose from 10% in July to 14.4% in August – the biggest increase of all the regions. Recent research commissioned by the BBC has also found that the North East could be the region of the UK most exposed to government cuts and economic hardship, affecting tenants’ ability to pay rent.

David Brown, commercial director of LSL Property Services plc said: “Rents have been rising all throughout this year but they haven’t affected tenant arrears until this month. But now arrears are up - in fact they are rocketing in the North East. Tenants everywhere are only going to come under further pressure as the cuts keeps coming, but it’s possible we’ll see a significant north-south divide develop. The North East is also where yields for landlords are amongst the lowest. That won’t encourage new landlords to invest there, this could mean less competition and no downward pressure on rent.”

The research from LSL shows that the recent rise in achieved rents alongside house prices remaining static for some three months means that an investor buying property now could expect a total annual return of 9.3%.

David Brown concludes: “Rents have been recovering and are now just short of their peak two years ago. With house prices static, yields are on the up, but investors should do their homework diving into property investment. No one knows where the economy is going next and a shock may be around the corner. That said, demand for rental property is strong. With a sensible investment model and understanding of regional conditions, the laws of supply and demand can be used to a landlord’s significant advantage.