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| THURSDAY 24TH MARCH 2005 |
 PRICES
STABILISE FOR UK LANDLORDS BUT RENT RISE
Paragon Mortgages’ March buy-to-let index reveals a further
increase in yields, which rose for the second month in a row
to 6.82%, up from 6.76% last month. Yields have risen steadily
over recent months, from 6.61% in September 2004.
This steady rise in yields comes on the back of a significant
pick-up in rents achieved by landlords since last summer,
and a stabilisation of property values. The average rent
has risen from £9,524 in August 2004 to £10,520
in February 2005 – an increase of just under £1,000
in 6 months.
John Heron, managing director of Paragon Mortgages said, "With
demand for rented accommodation from tenants steady or growing
in many areas and this demand not matched by supply, landlords
have been able to achieve higher rents and therefore higher
rental yields."
At the same time, the rate of increase in property values
has stabilised over the past 3 months, with a rise of just
over £1,000 or 0.7% since November, compared with 22%
over the 12 months from November 03.
"Prices have clearly stabilised over the past 3 months," continues
John Heron. "If the current rate of increase is sustained
over the rest of the year, we could expect annual house price
inflation to decline to less than 3% by the end of 2005."
Landlords are frequently able to negotiate more attractive
prices than owner-occupiers. People buying their own home
are inevitably more emotionally involved in the deal than
are investors, who treat property purchase dispassionately,
as a pure business transaction. Identifying the growth in
demand from tenants, investor landlords have been taking
advantage of the good supply of properties on the market
at competitive prices.
"Whilst owner-occupiers have been biding their time,
investors have been growing their portfolios from an average
of 11 properties last May to a current average of 13," said
Mr Heron.
Across the UK total returns over the past 12 months reached
an average of 27.8%, equating to a total of £35,559,
or £26,454 in capital appreciation plus £9,105
in rental income, on a property worth £127,880 at purchase
one year ago.
Across the regions
In terms of the regions, Yorkshire topped the tables this
month with total returns of over 68%. Over the past three
months the region has consistently ranked amongst the top
three regions with the highest total returns. The region
also experienced one of the highest increases in rental incomes,
rising by 6.0% to achieve rents of £9,905. This rise
in rents, combined with a slight fall in property values,
meant that Yorkshire was also the highest yielding region,
with a yield of 7.54%.
Rents increased in three other regions across England in
February, with the East Midlands up by 21.7%, the South East
up 1.3% and the North West by 0.7%. Yields increased across
six of the ten regions with the largest rise seen in the
North, where they hit an average of 7.27% (the second highest
to Yorkshire). This was attributable to a sharp drop in property
values. Yields in the East Midlands and the North West also
rose strongly, up from 6.94% to 7.28%, and from 7.14% to
7.30% respectively. Smaller rises were also seen in East
Anglia, the South East and Greater London.
John Heron said, "The North-South divide has lessened
this month as yields in the South East and Greater London
have improved quite significantly, which is welcome news
for landlords in the capital, where the buoyancy of house
prices has tended to erode rental yields."
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