Gross residential yields have remained steady on a monthly basis at 5.2% in February 2014, however they have fallen marginally on an annual basis by 0.1% over the previous 12 months, according to LSL Property Services.

If you take into account the strengthening capital accumulation, plus slightly improved void periods between tenants, the total annual returns on an average rental property rose to 9.7% in the year to February. This compares to 9.0% in January, and just 5.4% in February 2013. The major contributor to this would appear to be the rise in house prices meaning the average return would be £16,029, with rental income of £7,921 and capital gain of £8,108.

David Brown, commercial director of LSL Property Services, said: “Landlords are experiencing a very good mix of total returns. Rents are rising steadily, while property values are growing at a healthy pace. Moreover the cost of finance is at a record low. Even the fundamental shortage of property in the UK may gradually improve in the medium term, as new home starts pick up this year. Looking ahead, the private rented sector is set to enjoy both solid demand from tenants, and the benefits of a new lease of life for the property market as a whole.”

If rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 15.3% over the next 12 months, equivalent to £26,400 per property according to LSL.