March 22, 2010
Buy To Let Yields Exceed 10%
Typical rents have risen by 3.2% in the last 12 months, roughly in line with inflation.
According to the latest buy-to-let index from LSL Property Services, rents increased by 0.3% in February to an average of £658 a month.
The index revealed that yields rose to an average 4.8% and the total return from investing in buy-to-let over the last year increased to 10.6%, despite February’s slight drop in house prices.
That is the highest return recorded in the last two years. However, there are large regional variations.
The index shows that the North is lagging far behind the South, with southern areas “storming ahead” as northern ones languished.
LSL spokesman, David Brown, said the disparity in returns was more a symptom of rising property values than rapid rent increases, while the picture on rents has been much more mixed with no particular regional pattern emerging.
He says: “The recovery in the South began much more quickly than in the North – the ripples from the housing downturn are still affecting the market in the North, whereas the South has been enjoying a new wave of optimism over the last year.
“We would expect returns to improve in the North as the recovery in the South spreads out, but it may lag behind for a few months yet.”
LSL predicts that new entrants to the buy-to-let market would make an annual return of 8.5% (or £14,000 on a typical property) over the next 12 months.