Spiralling yields on London buy to let properties are streaking ahead of those earned by landlords in other parts of the country.
In the capital, buy to let yields have risen from 11.4% to 14.6% in the past 12 months – a cash equivalent of more than £38,100 a property.
The figures come from the latest buy to let review by letting agent LSL Property Services, owners of chains Reeds Rain and Your Move.
Nevertheless, average buy to let yields across England and Wales have gone up over the past year – from 5.7% in January 2013 to 8.9% in January 2014.
The increase represents a cash return of £14,760 split as rent of just below £8,000 and a rise in value of around £6,800.
The firm has also calculated if house prices and rents maintain their current trend, average buy to let yields nationwide could hit 13% or a return of £22,250 over the next 12 months.
David Brown, commercial director of LSL Property Services, said: “Rental yields remain historically high, and such rental income is still underpinned by a demand-driven lettings market.
“Meanwhile, rising prices are delivering an equity bonus for landlords – considerably boosting total annual returns. Such equity growth is also an important factor for some landlords looking to remortgage existing properties to fund new purchases.
“As mortgage availability grows and rates seem set fair for the time being, many landlords will continue to expand their portfolios.”
Average rents in England and Wales crept up 1.4% in the past year to £742 a month in January.
“Rents are now rising more gradually on an annual basis, thanks to the efforts of landlords to expand availability of tenancies. However, there still remains a dire shortage of housing across the country,” said Brown.
“Powerful incentives for those with the ability to make more homes available are important in easing some of the short-term strain for tenants.
“But rents will not fall in real terms for a long while there remains such a severe mismatch between the building of new homes and the number of households looking for somewhere to live.”