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Solid start to 2006 for buy-to-let investors

Wednesday, 1 March 2006 12:00 AM

Buy-to-let property investors enjoyed a solid start to the year, with rises in rental incomes, property values and rental yields.

Demand for rented property continues to increase and buy-to-let landlords are increasingly confident, reports Paragon Mortgages.

Its January Buy-to-Let index reveals that rental income rose by 1.22 per cent over the month, from £10,363 in December to £10,389 in January, and have now risen by 3.33 per cent over the last three months.

Rental yields - rent as a percentage of the purchase price - rose from 6.42 per cent in December to 6.45 per cent in January in England and Wales.

"With demand for rented accommodation from tenants steady or growing in many areas, landlords have been able to achieve higher rental yields, notwithstanding the continued rises in property values we've been seeing recently," said John Heron, managing director of Paragon Mortgages.

The average amount paid by buy-to-let landlords for property rose by 0.68 per cent to £162,609, and has risen by 3.65 per cent during the last three months.

Mr Heron added: "After a lull in prices towards the end of 2005, the housing market has gathered momentum since the beginning of this year, and prices for all types of property are rising more strongly in most parts of the country.

"The sustained buying activity and the higher prices that go with it reflect landlords' renewed confidence in the private rented sector."

Wales saw the strongest monthly increases in rental yields of any region, rising from 6.9 per cent to 7.75 per cent, and also the largest increases in rental income to an average of £10,214.

Greater London, where rental yields were unchanged at 6.05 per cent, saw the largest rises in property values of 5.14 per cent. Rental yields are consistently lower in London due to the higher average property prices, but average rental income is high at £17,555.

Mr Heron added: "Over the past two years, the general trend in rents has been resoundingly upwards. The fact that growing numbers of professional investors are willing to pay higher prices for properties demonstrates that landlords are confident that current levels of demand are sustainable and indeed are set to increase."

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