Buy-to-let yields rise in South-East and London

Paragons October buy-to-let Index shows yields have risen in the South-East by 0.8% and in Greater London by 0.1%.

Out of the 10 regions, the South-East and Greater London have consistently displayed the lowest yields due to higher property prices, yet yields have risen in both regions this month on the back of higher rental incomes.

Landlord yields in the South-East and Greater London currently stand at 6.4% and 5.9% respectively.

Average rental incomes in the two regions rose this month to reach 10,549 in the South-East and 16,908 in Greater London. Property values in Greater London currently average 288,490 and in the South East 165,721.

Over the last 12 months rental incomes in Greater London have risen by 18.6% and by 6.5% in the South-East. Over the same period property values in these regions rose by 21.2% and by 4.9% respectively.

John Heron, managing director at Paragon, says: “Due to sustained demand rental incomes have risen more rapidly than property values in some areas, which have in turn had a positive impact on rental yields. The start of the new academic year typically results in a rise in tenant demand, especially in regions with large student populations like the South-East and Greater London.”

Across the remainder of the regions East Anglia, the South-West and the West Midlands also saw increases in rental incomes.
Nationally, average property values eased slightly this month, to 160,001. Rental incomes also declined slightly in September, down from the record levels recorded in July. Average landlord yields remained at 6.5%.

Heron adds: “While rental incomes have stabilised since the heady heights achieved over the summer the overall trend is still upwards over the longer term. The average rent has risen from 9,606 in September 2004 to 10,386 in September 2005 an increase of 8%. As we continue into autumn we could expect to see a pick-up in rental incomes, if the market were to follow the same pattern as that seen over the autumn of 2003 and 2004.”