The average yield on a residential property has reached 4.5 per cent, a two-year high, and the average yield in London is at 4.1 per cent, a four-year high, according to Kent Reliance.
Across the UK the average rental price per calendar month is £896, having risen 1.3 per cent annually.
However, the private rented sector has only increased by £6bn in the last year, following weakening house prices and subdued growth in the number of rental properties on the market, adds the firm.
The supply of new homes in the PRS is increasing by 0.2 per cent year-on-year, with 5.4m properties currently in the sector.
According to a survey run in association with BVA BDRC, landlord confidence has fallen, with 37 per cent of landlords holding a positive view for their portfolio, declining from 41 per cent the year prior.
In addition, 24 per cent of landlords intend to increase rents within the next six months, almost five times the number which expect to reduce them.
OneSavings Bank chief executive Andy Golding says: “Landlords have rolled with the punches as best they can, but there is no escaping that growth is subdued in the private rented sector following four years of government intervention.
“Brexit uncertainty has only compounded this issue, having the obvious knock-on-effect on landlords’ confidence.
“Yields are climbing as rents rise faster than house prices, providing further opportunities for committed investors.
“Without some policy stability, there is the tangible risk that the supply of homes will contract, and rents will become less affordable.
“Rents are already rising and will continue to do so as landlords come to terms with higher set up and running costs, on top of larger tax bills. Neither outcome suits tenants, nor helps with the ultimate issue of housing affordability.”