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Buy to let landlords reap rewards

4th October 2005 | back to article listings BACK    print this article PRINT

Buy to let property investment prices cooled slightly through September, but remain 5.5 per cent - almost £8,400 - higher than in April, says Paragon Mortgages monthly buy to let index, and the "best letting conditions in years".

The average buy to let property cost £160,984 in August, compared to £152,622 four months earlier and 13.7 per cent up on the £141,765 average buy to let price in August 2004.

Wales has risen to the highest spot on the rental yield league table, with average returns of 7.37 per cent as Yorkshire, which has offered the greatest returns for much of 2005, slipped into fourth place with returns of just under seven per cent.

The west midlands remain in second place with rental yields of 7.31 per cent. The north of England maintained its leading position in the overall returns table of rent yield and capital appreciation, offering property investors a return of 40.2 per cent, with Yorkshire returns on 39.9 per cent and the north west on 37.1 per cent.

The high returns in the north of England were mainly due to high levels of property price inflation over the course of the year. The national average overall return stands at 20.3 compared to 22.3 in July.

"This month sees a modest easing of prices and rents, attributable to a 'spike' in the July average caused by some unusually high value transactions completing in the month. August is in line with the longer term trend, however," said John Howard of Paragon.

"The market took a breather in the winter and early spring 2004 - 2005, which translated into flat property prices paid by landlords. More recently, there’s been growing evidence that landlords are willing to engage in transactions and that is having the effect of moving prices of investment properties purchased gently upwards.

"The general trend in rents has been resoundingly upwards over the past 12 months. Since August last year, rents are up by almost £1,000 or 10.5 per cent, more than three times the rate of inflation," he added.

Residential buy to let landlords are equally split between landlords interested in property investment for a combined rental income and capital appreciation, and landlords looking for a long term investment opportunity. Only one in every 12 buy to let landlords enter the market for a rental income alone.

The sector is currently booming, with a quarter of landlords entering the market this year, although the average length of time in the buy to let property investment market remains five years.

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