Landlords Face Reduced Yields As Property Prices Continue To Rise

Thursday, April 24, 2014

Landlords Expecting Reduced Yields As UK House Prices Soar

Landlords Expecting Reduced Yields As UK House Prices Soar

Landlords Expecting Reduced Yields As UK House Prices Soar

UK house prices are rising faster than rental prices, leaving buy-to-let investors with reduced yields compared to previous years, according to new research by mortgage lender BM Solutions.

And with residential property prices predicted to continue rising this year, many landlords without rent protection could see their dwindling rental yields fall even further.

Private rented sector rental prices are not increasing at the same speed as residential property sales prices resulting in reduced potential yields for landlords who want to increase their property portfolios.According to BM Solutions, the average rental yield that landlords could expect has dropped to 5.5%, down from the 5.6% observed in the second half of 2013.The BM solutions research also found the lowest rental yields are in London, averaging at just 4.8%, despite landlords requesting an average rent of £1,417 (GBP) per month in the capital, 102% higher than the UK national average of £701 (GBP).

Rental properties in the North of England and in the Yorkshire and Humber regions provide landlords with the biggest chance of decent rental yields, with both regions offering a 6.6% return.

Tenants in these areas pay an average rent of around £500 (GBP) per month, almost a third of the price of renting property in London.

But residential property prices are even further apart. Recent figures from the Land Registry revealed the average property value in London is £409,881 (GBP), compared to £98,292 (GBP) in the North East.

This differential could see more property investors purchasing buy-to-let properties for capital growth rather than to generate a decent rental income.

Yields fall as property values rise but the average price of a typical buy-to-let property has grown marginally faster that average rents, reducing the potential yield.

The UK property market collapse in 2008 saw the capital value of properties plummet but rents in the UK’s private rented sector continued to rise, providing landlords with healthy rental yields.

The UK buy-to-let market has boomed over the last 12 months despite reduced yields and rising property prices are good news for property investors in the long term, allowing them to reap the benefits of their investments in years to come.

UK property transactions increased by 28% to 46,430 in the second half of 2013, up from 36,400 observed in the same period in 2012.

Landlords with rent protection are the ones reaping the rewards because as well as benefiting from record low mortgage rates, they are also guaranteed a continuous rental income should their tenants suffer an unexpected change in circumstances.

Specialist Services For Landlords Boost UK Property Investment

Specialist Services For Landlords Boost UK Property Investment

This was written by Mike Clarke. Posted on at 11:30 am. Filed under Buy To Let, Insurance. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.