Landlords with properties in England and Wales have seen rents rise by 3.3%, according to an index published by Your Move and Reeds Rains.
However, for landlords in Scotland, rents rose by just 2.1% over the past year. When the Scottish regions are analysed to explain the slower rate of increase, Lothian's and Edinburgh’s rents rose by 7.7% to an average rent of £644 - up from the average rent in 2015 of £598.
Rents for landlords in the East of Scotland fell by 2% year-on-year and there's now been four consecutive months of negative growth with average rents now standing £520. Landlords in Clyde and Glasgow have also seen rents fall by 0.8% over the past year.
The lettings director at Your Move Scotland, Brian Moran, said rent arrears are falling and affordability is increasing, which has an important impact on rents being charged. In addition, the gross yield being enjoyed by landlords is at a 17-month high - fuelled by soaring property prices. Between January and February, the gross rental yield for a rental property in England and Wales was 4.8%.
The index takes into account capital growth and rental income and it reveals the typical landlord is now enjoying returns of 12.7% in the year to February, the highest for 17 months.
In cash terms, the average landlord's return was worth £23,227 before expenses such as mortgage repayments and maintenance costs. Of that figure, capital gains made up £14,767 while rental income is £8,460.
Your Move director, Adrian Gill, said: “Rising rents and rising property prices are two sides of the same coin. There's not enough supply to meet soaring demand, and the building of more new homes would be a better response and profitable. Government inaction is preventing homes being built.”
He said that rental activity and property investment will continue to be lucrative avenues until the UK builds enough new homes to match its rapidly increasing population.
New fees revealed under Rent Smart Wales
Meanwhile, plans for increasing the fees for licensing management and letting agents in Wales are changing after they were heavily criticised by smaller landlords and agents as being too expensive. Under the Rent Smart Wales scheme, all letting agents must be licensed and landlords need to be registered and, in most cases, be licensed also.
Originally, all letting agents paid the same £3,728 licence fee but now that is going to be changed based on the number of properties that are managed by an agent.
As result, smaller agents will now be paying a lower amount but larger firms will pay much more. The five-year license fees will range from £1,890 to £6,600, which is also dependent on whether the agent is a member of a recognised professional body, such as ARLA.