Investor landlords in Greater London and the South-East have seen rising yields on their rental properties for the third month in a row, the June edition of Paragon Mortgages' buy-to-let Index reveals.
Traditionally, the south-eastern corner of the country has offered lower yields on rental properties, as higher property prices are not matched by higher rents to the same extent, while the Midlands and North offer higher yields.
However, so far this year yields in the capital have risen, from 6.42% in February, to 6.73% in March, 6.90% in April, and 6.95% in May. Meanwhile, in the South-East they have risen more modestly, from 6.45% in February, to 6.62% in March, 6.64% in April and 6.66% in May.
John Heron, Paragon Mortgages' managing director, says: “Over the past few months, we've seen some firming of yields in those parts of the country where they have tended to be consistently lower. In fact, London landlords have seen an increase of over 50 percentage points over the past quarter, reflecting lower prices paid by landlords for the properties they add to their portfolios. The average price for a rental property bought in London in May was £229,899, down from £237,950 in March.”
At the same time, there may be signs this month that the nationwide surge in landlord property values has started to stabilise, with prices paid by residential property investors up only fractionally by 0.10% this month.
Heron adds: “The unrelenting rise in property prices since the end of last year, as investors found themselves competing with owner-occupiers to buy houses, meant that by April landlords were paying 11% more than in December 2003 for a property and 25% more than they were 12 months before. This month, we've seen an almost negligible rise of just 0.10% – the equivalent of just over £100 on a property worth £137,000.”
Nationally, both yields and rental incomes have registered small declines this month, with yields standing at 7.20% and rents at £9,867, down £86 compared with the previous month.