Paragon MortgagesÂ’ January Buy-to-Let Index reveals a New Year pick-up across the board, with rising rental incomes, property values and rental yields.
In England and Wales average rental incomes rose by 1.22 per cent over the month from £10,363 in December to £10,489 in January.
Over the last three months rental incomes have increased by 3.33 per cent, according to Paragon. The rise in rents served to improve rental yields achieved by landlords, which rose from 6.42 per cent in December to 6.45 per cent in January.
John Heron, managing director of Paragon Mortgages, says: “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.”
The Index shows that property values were up 0.68 per cent in January. Thjs takes the average property prices paid by landlords to £162,609 – up by 3.65 per cent over the past quarter, from October’s figure of £156,879.
Heron explains: “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 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. Indeed, recent data from the Council of Mortgage Lenders showed that gross mortgage lending reached a record high in January 2006. ”
Heron says that the general trend in rents has been upwards over the last two years. “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”.
Six out of ten regions experienced increases in yield during January. Wales saw the strongest monthly increase from 6.90 per cent to 7.75 per cent, while smaller rises were seen in the West Midlands. Greater London was unchanged at 6.05 per cent.
Seven out of ten regions experienced increases in property values this month. Greater London saw the largest rises, of 5.14 per cent, as prices reached an average of £290,297. Over the year property values in Greater London have risen by 9.88 per cent from £264,186 in January 2005. Due to higher average property prices Greater London is consistently one of the lower yielding regions in the UK.
Other areas experiencing increases in property values were the East Midlands (to £144,666), the West Midlands (£135,248), the South East (£164,728), Wales (£131,710), Yorkshire (£135,658) and the South West (£182,077).
Rents increased in sever out of ten regions – mirroring property values. Wales and the West Midlands experienced the largest increases, to reach £10,214 and £10,254 respectively. Greater London and the South West saw increases of 5.10 per cent and 2.59 per cent, bringing their respective rental incomes to £17,555 and £11,935. In the South East rents were up 1.79 per cent to £10,441. Smaller percentage rises were seen in the East Midlands (0.43 per cent) and the North West (0.19 per cent).
