According to the latest Buy-to-Let Index from LSL Property Services, at £735 per month the typical rent in March 2013 was 4.2% higher than March 2012.

Rents were higher on a monthly basis in six out of ten regions, with the biggest rise recorded in the capital. London rents rose by 1.3% in March to stand at a record average of £1,106 per month. This was followed by the North East where rents grew 0.9% compared to February, while in Yorkshire and the Humber rents increased by 0.6% on a monthly basis.

However, rents dropped the fastest in the South West, falling 0.5%, followed by Wales where rents dropped by 0.4% in a month.

On an annual basis, rents rose everywhere except the South West. London saw by far the biggest annual increase, with rent in March 7.9% (£81) more expensive than a year before. Wales and the East Midlands both saw annual rental inflation of 3.9%, while rents in the North East grew by 3% annually.

David Brown, commercial director of LSL Property Services, said:

“Winter staged a last-ditch counter offensive in March. But in spite of the unseasonal weather the rental market has gained some ground. Over the next few months it looks likely the spring bounce will continue. Of course, the regional picture remains more complicated. This month witnessed even more divergence between London and the rest of the country. But the overall picture is clear. With only modest improvements in the UK’s housing supply, rents will keep being forced upwards.”

Total annual returns on rental property grew to 6.3% in March, representing an average return of £10,329 comprising rental income of £7,751 and a capital gain of £2,578.The average yield on a rental property was 5.3% in March, compared to 5.2% in the same month last year.

Brown said: “Landlords shouldn’t count their spring chickens yet, and the hunt for a reliable yield will be as varied and complex as ever. Especially given improvements in the purchase market. First-time buyers are seeing progress on mortgage availability, and many will have welcomed the new Help-to-Buy initiatives in March’s budget. When it comes to buy-to-let, there remain plenty of reasons to be cautious, but it will be tempting to think of March as a turning point for rents.

“For most people in need of somewhere to live, the private rented sector continues to be a more affordable option. Lenders are still wary about their balance sheets, resulting in new lending to first time buyers being matched by mortgages with much more equity, such as buy-to-let. These loans are also at very low rates, and alongside newly buoyant rents, the availability of this credit will make many landlords tempted to expand their portfolios.”

Total rental arrears in March were £284m, rising £36m from £248m in February. This equates to 8.5% of all rent across England and Wales, compared to 7.4% of all rent in February.

Brown concluded: “Sadly, more people seem to be struggling again. After an initial recovery from December’s financial woes, March looks like an unfortunate regression, and it highlights just how strained many budgets are. Economists are forecasting some improvements in real earnings this year, but that will take time, and won’t be universal.

“This month’s renewed dilemma demonstrates even further how landlords need to seek expert advice, and work together with tenants when things start to go wrong. An honest and imaginative approach can provide the best solution, but communication channels must always be kept open, and potential problems voiced at the earliest opportunity.”