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Flat house prices limit B2L yields despite rent rises

Static house prices are preventing landlords from capitalising on rising rents and translating them into higher yields, say buy-to-let experts.

Research published today by BM Solutions shows the average monthly rent rose 4.8% in 2011 to reach £716, up from £682 in 2010. But the average yield dipped 0.1% to 6.1% in 2011.

Phil Rickards, head of sales at BM Solutions, says house prices have remained flat over the past year, which has stifled rental yield growth.

He says: “With house prices likely to remain static again this year, buy-to-let landlords can expect little capital gain on investment. We expect rental income to drive returns.”

Ying Tan, managing director of The Buy-to-Let Business, says while demand is keeping rents high, flat prices will keep a lid on 2012 yields.

But he adds: “It is important to consider regional variations, as London and the South-East are still seeing moderate price growth, which will affect yields.”

BM Solutions’ analysis shows that the largest annual rise in rents in 2011 was in East Anglia, at 8%, while the greatest rental yield was in the North at 7%.

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