Buy-to-let investors are back, according to the latest figures, which show that estate agents have reported an increase in landlords buying property in the past three months.

Figures compiled by the Royal Institution of Chartered Surveyors (RICS) for The Times showed a 2 per cent increase in the number of surveyors that reported an increase rather than a fall in buy-to-let demand in the three months to September.

However, investors are no longer interested in snapping up city-centre flats; RICS reported increased demand for houses from buy-to-let landlords, with 5 per cent more surveyors reporting an increase, while there was a sharp drop in demand for flats, with 15 per cent of surveyors reporting a fall rather than a rise.

The revival in buy-to-let activity has not been evident in all parts of the country.

Demand is particularly weak in the Midlands, according to RICS. In the East Midlands, 12 per cent more agents recorded a fall in investment than in the previous three-month period, increasing to 21 per cent of agents in the West Midlands.

Demand from landlords was strongest in the North West, where 29 per cent more surveyors reported a rise rather than a fall.

The RICS figures are the first indication of a recovery in the buy-to-let market, which was hit hard by the sharp drop in mortgage availability.

The most recent figures from the Council of Mortgage Lenders show that, in the second quarter, 21,600 buy-to-let loans were granted, a decline of 4 per cent on the previous three months.

However, estate agents have attributed the rise in buy-to-let investment to a higher proportion of investors making outright cash purchases rather than taking out mortgages, which remain difficult to obtain.

Figures from Allsop, the UK’s biggest property auctioneer, show that landlords represented 85 per cent of bidders in July, up from 65 per cent a year earlier.

It added that landlords had been encouraged to hunt around in the hope of picking up repossessed buy-to-let stock. They had also been driven to property by relatively poor returns from other investments, such as savings accounts.

Gary Murphy, partner at Allsop, said: “The dominance of the private investor indicates that those with cash to invest are currently attracted to residential property at a time when prices are low compared to the peak in 2007. This is at a time when other investment vehicles, particularly returns currently receivable on cash deposits, are less attractive.

“The current market appears to view net returns from residential property as relatively rewarding and the prospect of capital growth highly likely in the medium term.”

Average rental yields on assured short-hold tenancies have risen from a 2006 low of 5.08 per cent and are currently at 7.96 per cent in London and highest at 8.97 per cent in the Midlands, Wales and the South West, according to Allsop. The national average return on rental property was 8.5 per cent, the auctioneer said.