Yields have remained stable at 6 per cent for the past year and although landlords have to deal with bitterness on the part of the first-time buyers they are squeezing out of the housing market, ultimately most are finding it more affordable to rent in these times of elevated interest rates and rocketing house prices.
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Strong tenant demand, on the other hand, tends to place upward pressure on rents, commented Nigel Terrington, chief executive of Paragon. However the majority of landlords are cautious by nature, with an average loan-to-value across their portfolios of less than 40 per cent. They have also chosen fixed rate mortgage deals, so are not unduly affected by rising interest rates.
Investors are remaining optimistic despite five rate hikes over the past twelve months piling on the pressure. In addition, buy-to-let is praised as filling a gap in the market left unplugged by the dwindling supply of social housing, alongside the need for decent yet affordable properties and the steadily rising number of students across the country.
This month, annual total un-geared returns rose above 10 per cent. In addition, the average buy-to-let property which was worth £172,772 a year ago now generates a rental income of £10,433 and has seen £7,021 capital appreciation over the past 12 months.
