Buy-to-let rental returns fall in nine regions out of ten
Yields are down as rents fall behind the rise in property prices
Private landlords are experiencing a decline in rental returns across most of the country, latest data shows.
Estate agent Chesterton Humberts calculates that yields have fallen in nine out of ten of the most popular regions over the past year.
The biggest faller is York, with rental returns down from 7pc in 2013 to 6.4pc today. This yield still remains one of the highest, however.
As the graph below shows other areas popular with buy-to-let investors also posted declines, including Sheffield, Manchester and London.
For London properties the yield has only fallen slightly, from 4.3pc to 4.2pc, but the returns on offer in the most expensive, “prime2 central areas of the capital have fallen to around 2.5pc. In Mayfair for instance yields stand at 2.6pc, while Knightsbridge is even lower at 2.4pc.
Reading, the only city to not buck the trend, remained static. The yields on offer remain the same as a year ago at 6.3pc.
Crucially, the estate agent’s figures assume a cash purchase – they do not make allowances for the cost of landlords’ mortgages. As The Telegraph has warned, landlords with large loans are experiencing much lower yields than these – and if rates rise they could see their returns wiped out altogether.
Nick Barnes, head of research at the estate agent, said yields have been driven down as a result of sharp increases in property prices across the country, which have outpaced price rises.
The latest house price statistics from the Office for National Statistics, released on April 15, show that prices across the UK have risen by 9.1pc over the past year. Prices in London rose 17pc, their fastest rate since 2007.
Stripping out London and the South East, house prices rose by 5.8pc across the country.
But Mr Barnes said the fall in yields will not cool buy-to-let demand.
“The shorter term reality is that smaller landlords will continue to dominate the market, attracted by capital growth prospects and looking for rental income just to cover operating costs,” said Mr Barnes.
“However, a clear strategy needs to be adopted before investing to avoid potential pitfalls – beginning with thorough research on supply, demand and pricing for rental property within your chosen location and a clear understanding of what your operating costs will be, including tax.”
Article courtesy of The Telegraph