RENTS in Scotland have reached an all-time high with demand for housing outstripping supply as many people seek to relocate to employment hotspots.

A new study of the buy-to-let market has found that the average rent is now a record £539 per month, up 0.2 per cent since October and 2.2 per cent on the same time last year.

According to the Scotland Buy-to-Let Index from Your Move, rents in Edinburgh are increasing at the fastest pace across the country and have risen by 6 per cent in last year, while those in Glasgow grew by 2.5 per cent.

However, the rising cost of renting a property has had an impact on the number of tenants falling into arrears, which has also grown during the same period.

Experts have warned that there could be more to come unless wages start to rise in line with the cost of renting a property.

However, the pace rents are increasing by has slowed since the start of the year and is expected to stabilise during 2015.

Christine Campbell, regional managing director of Your Move, comments: "Scottish rents have been steadily edging forwards, and despite only taking baby steps, they reached a new pinnacle in November.

"Demand and supply are still out of kilter, and in highly sought-after employment and cultural nerve-centres like Edinburgh, this overflowing competition for homes to let has topped up rent prices.

"But the outlook has shifted starkly from the start of this year, and annual rent rises have been trimmed back to healthier levels, as usual market forces check the rate of growth. In real terms, average rents across Scotland are only 1.2% higher than they were a year ago."

The report found that the overall health of tenants' finances had declined in November, with the proportion people failing to pay their rents on time rising slightly to 6.6 per cent from 6.5 per cent in October.

However, across the UK, the most recent quarterly Tenant Arrears Tracker from Your Move and Reeds Rains found that the proportion of tenants facing significant arrears of more than two months rents dropped to 1.4 per cent during the the third quarter of 2014, down from 1.6% of all tenants at the same time last year.

Overall, this means that 98.6 per cent of British tenants now avoid falling into severe rental arrears.

Ms Campbell said: "Many households will be basking in confidence at the boosted spending power in the run-up to Christmas this year, as inflation continues to tumble.

"But this is only one factor that pulls on household purse strings, and overall tenant finances across Scotland appear to be stuck in a rut, without any clear improvements over the past year.

"Long-term financial stability for renters rests on the jobs market. It's not just about getting into work either - but ensuring wage growth for those already in employment accelerates to the next gear, preventing more working households from straying into the red zone and in the worst case scenarios, risking eviction."

Rising rents have provided a boost to landlords, who made a return of around 8.4 per cent in the twelve months to November from their property investments.

The report said that an average landlord in Scotland has seen a return, before any mortgage payments or other deductions, of £12,913.

The report predicted that next year could see a more turbulent time for the buy-to-let market, with letting controls and rental caps being mooted by some MPs.

Ms Campbell said: "Speculation over how future rental caps or more stringent letting controls may disorientate the stable direction rents are currently moving in, and any off-piste spike in rents would hurt thousands of households who depend on private rented accommodation.

"Renters rely on landlords too. Increased investment into the sector is the only way to alleviate the strain of the current housing shortage and soothe competition for rental homes.

"If buy-to-let investment dries up, and the pool of properties to let contracts, rents will swallow the shortfall and eat into tenant finances."