Assetz® News - Yorkshire: Still a Hot Spot for Buy to Let

Yorkshire: Still a Hot Spot for Buy to Let

31st August 2005 |

The August edition of the Paragon Mortgages Buy-to-Let Index shows that, despite a seasonal slowdown in the market, regions such as Yorkshire and the North West continue to outperform other parts of the country.

Yorkshire has seen rental incomes rise over the month from £9,383 in June to reach £10,495 in July. Over 12 months, rents in Yorkshire have risen by 36.7%. Landlord property values in the region have increased by 38.6% since July 2004 to reach £143,684. Despite a large increase in property values, Yorkshire remains one of the highest yielding regions in the country, at 7.3%.

John Heron, managing director of Paragon Mortgages, comments: “A number of factors contribute to the sustained demand for rented accommodation in Yorkshire. The burgeoning student population of England’s largest county, with major universities at Sheffield, Hull, Leeds and York, among others, underpin demand for rented properties. Many students, after graduation, remain in the county and as ‘first jobbers’ look for shared accommodation with their friends in the major towns. An important demographic trend that has sustained the growth of the private rented sector over the past decade or so has been the tendency for young people to leave the family home at a fairly young age to go on to further education and not return. In addition, there has been a net influx of jobs in some parts of Yorkshire which has helped create a requirement for more rented homes.”

“When looking at the private rented sector, it’s important to remember that landlords are running a business in which customer demand is key. If individuals, couples or families need homes in a particular area, landlords are likely to respond to meet that demand.”

The North West has also seen a strong buy-to-let market over the last year, notwithstanding a slight decline in rents this month. Rental incomes in the region have risen by almost 30% and property values by over 34% since July 2004. Yields in the North West, at just under 7%, remain above the national average of 6.7% and on a par with the South West and East Anglia.
At the same time Greater London, consistently one of the lower yielding regions, has seen yields rise slightly to 5.8% this month as both rental incomes and property values rose.

John Heron, Managing Director, Paragon Mortgages comments:
“Despite a cooler summer market, landlords remain cautious yet opportunistic buyers. September is a busy time in the rentals market with many people starting new jobs and, of course, the new academic year starting in universities and colleges up and down the country. We’ve continued to see a reasonable flow of property investment in many parts of the country as landlords look to purchase suitable properties in advance to meet identified demand.”

In terms of total returns Yorkshire has returned to pole position, generating returns of 46%, and indeed has been top of the table for every month this year, except last month. The North West is now in second position, with total returns of 42%, followed by the North at 35%. Wales and Greater London also registered total returns above the national average.
John Heron says: “With good returns on their lettings businesses and strong levels of capital appreciation over the past year, landlords continue to benefit from good overall returns – taking into account both rental income and capital appreciation. Overall returns have now reached 22%, up from 21% last month and a low of 18% in April this year.”

Nationally, rental incomes increased by 2.8% this month and now stand at £10,835. This represents the largest increase in rental incomes since November 2004. Over the last twelve months landlords have seen rental incomes rise by 12.9% from £9,598 in July 2004.

Property values have also continued to increase, by 3.2% this month, taking the average price to £162,409. Over the last year property values have risen by 15.5%. As the increases in property prices and rental incomes were similar this month, average yields remained virtually stable at 6.7%.

This month, terraced and semi-detached properties saw values increase by 8.0% and 7.7% respectively while detached properties, consistently the most expensive type of investment, saw values fall by 5.9%. Flats also experienced a slight dip in value of 0.4%.

Yields for terraced properties currently stand at 7.2%, semi-detached 6.7%, detached 6.3% and flats 5.9%. In terms of rental income detached properties continue to register the highest figure at £14,290, semi-detached £13,008, terraced £10,933 and flats £8,409.

Continues John Heron: “Landlords across the majority of the country are seeing steady increases in rental incomes. Prices paid by residential property investors are still growing, but at a much slower rate than was seen during the heady days of mid-2004 when investors had to compete with owner-occupiers in a busy market with limited stock available. The recent cut in interest rates should encourage landlords to expand to their portfolios as there are still good deals to be negotiated while the owner-occupier market remains relatively slow”.

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