Rents soared to a record high during September as demand continued to be boosted by frustrated home-buyers, research indicated today.
Landlords hiked their rents for the eighth consecutive month during September to leave them at an average of £689 a month, according to LSL Property Services.
The cost of renting a home is now 3.1% higher than it was last year and above the previous all-time high reached in August 2008.
The steep rise in rents is being driven by soaring demand as first-time buyers either delay decisions to get on to the property ladder in the face of housing market and economic uncertainty, or cannot do so because of the problems in the mortgage market.
But the supply of rental homes is not increasing at a fast enough rate to meet the new levels of demand, as landlords too face difficulties getting a mortgage.
David Newnes, estate agency managing director of LSL Property Services, said: "Landlords have seen tenant demand continue to hit new heights. The mortgage market remains tight and many buyers simply cannot get the finance to get a foot on the property ladder.
"And with potential spending cuts on the horizon, and uncertainty over the direction of the economy, many buyers are choosing to remain in rented accommodation for longer.
"As a result, demand for rental accommodation is increasing, and supply is not rising fast enough to match it."
He said the situation had turned the buy-to-let sector into a landlord's market.
The imbalance between supply and demand is particularly acute in London, where rents soared by 2% during September to average £972 a month - 6.8% more than at the beginning of the month.
Rents in the East of England and West Midlands also rose by 1%, while in the South East they were 0.9% higher.
But at the other end of the scale, landlords in the South West and North West actually reduced the amount of rent they charged during the month.
Across the whole of the country, the rise in rents means an investor buying a buy-to-let property could expect to make a total return of 9.2% or an average of £15,592, once both rental income and house price growth is factored in.
But many tenants are still struggling to keep up to date with their rent. Although arrears levels fell slightly during the month, around 10% of rent remained unpaid.