Money News
New data from Birmingham Midshires shows that the average total gross return (exclusive of fees and mortgage interest costs) for a buy to let (BTL) investor in 2007 was 16.3% - up from 13.5% in 2006.
Across all regions of the UK capital values on BTL properties increased - much of the growth occurring in H1 2007. Indeed, it slowed to 1.6% in Q4 2007 (in response to 5 base rate increases) - a slowdown the lender expects to continue this year.
The average price of a BTL property in 2007 was £154,795, an increase of 10.9% on 2006. However, the average price of a BTL house was 27% lower than the average price paid for an owner occupied property (£197,039 in December 2007) - largely due to BTL properties typically being smaller, as a majority are flats and terraced houses.
On a regional basis, BTL investors in Northern Ireland saw the strongest growth in capital values - property prices there rising by 39.2% during the year. Greater London recorded the next largest increase of 15.8%. Only two other regions saw double-digit increases - these being the South West (10.7%) and South East (10.5%). The smallest increases were in the East Midlands (5.7%) and the North West (7.2%).
For BTL property investors, Greater London still commands the highest average price of £290,830. This is 2.90 times higher than in the North where the average price is the lowest at £100,345.
Meanwhile, average rental values in the UK increased by 13.1% to £698 per month last year, compared to £617 per month during 2006.
Regionally the largest increases in rental values were in Scotland (22.6%), North (18.2%) and Greater London (15.4%). Besides East Midlands (8.9%) and South West (9.2%), all other regions experienced double digit rent increases.
Average rent in Greater London was £1,293 - close to £300 per week. And monthly rent in the capital was 63% higher than the average rent in the second highest price region, the South East (£791). Meanwhile, average monthly rent in the North stood at £494, the lowest in the UK and the only region below £500 per month.
BTL rental yields nationally increased marginally over the year to 5.4% in December 2007 from 5.3% 12 months earlier - rental yields being highest in Scotland (6.1%) and the North (5.9%). Yields were lowest in Northern Ireland (4.1%) and the South West (5%).
As for total returns, they were highest in Northern Ireland (44.3%). Greater London had the second largest increase with returns of 21.2%, followed by the South East and South West (15.8%). The smallest total returns were in the East Midlands (11%), North West (12.6%) and West Midlands (13.2%).
Total return is calculated based on the rent at the start of the period and the capital appreciation over the period. This calculation excludes fees and mortgage interest costs.
15 February 2008 © Moneyextra.com
Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.