Waves of migrants from the new EU members have driven growth in the UK rental market, with landlords experiencing strong yields, especially in those areas currently experiencing slower capital growth.

Clearly, this is a pattern we would expect - high capital growth = lower yields and lower capital growth = higher yields.

The regular Buy-To-Let index survey by Paragon Mortgages shows that landlords enjoyed an average yield from their investment of 16.5% in June - up from 11.9% at the start 2006.

The rises have been driven by a combination of factors - notably - a greater number of single-person households (through divorce and younger people delaying marriage or setting up home together), an increase in the student population and, of course, the large number of new migrants coming into the market.

Data from Paragon reveals that legal migration to the UK has increased from 314,000 in 1994 to 582,000 in 2004. As the working populations of Bulgaria and Romania are also almost certain to qualify to live and work in the UK when these two countries' membership of the EU is ratified, even greater numbers of migrants can be anticipated.

As well as raising demand for rental properties, the new migrants are also responsible for affecting the pattern of tenancy habits in the UK.

Migrants tend to stay in a rental property and within the rental sector for longer than non-migrant tenants, possibly because they tend to carry out lower paid work and cannot afford to buy. Plus, any new migrant, settling into a strange country, is unlikely to have the means or the inclination to buy within the first few years. Many will rent indefinitely.

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The average rental yield on property throughout the UK was 6.04% in June - up by a mere 0.01% from the same period last year.

But, as usual, there is a large geographical disparity.

Yields in the South West are highest at 6.48% on average. Here the average price of property is £173,497. Yields in Wales were almost on a par at 6.47%, here the average property costs £136,040.

Of course, yields in areas seeing the strongest capital growth are lower and this is particularly true of the South East, with a yield of 5.83% on an average cost of a property of £188,801, and in London, where the yield averaged 5.76%. Here average prices were £338,934 in June.

During the three months up to and including June, the average rent increased by £351 - or 3.5%, with an average gross annualised rental income of £10,433, up £240 from the previous month.

As the UK population is currently growing at 0.3% per year, almost all due to immigration, this cannot help but put further upward pressure on rents.

The Department for Communities and Local Government believes that over 200,000 households are needed each year to match demand, and migrants to the UK are believed to account for around one third of this demand. Only 20% of migrants become homeowners within three years of moving to the UK.

John Heron, Paragon Mortgages managing director, said: 'Long-term trends in terms of household formation and inward migration point to a steady growth in the role of the private rented sector in meeting people's housing needs and investors are responding to this by increasing their involvement proactively.'

The BTL survey also found that 23% of landlords who have multiple investment properties expect demand to increase throughout 2006. 27% of landlords with smaller portfolios believed the same.