Money News
In and around London, average rent achieved by buy-to-let landlords on their new property investments has continued to rise more rapidly than the prices they pay for these properties, according to the latest edition of Paragon Mortgages' Buy-to-Let Index.
Recent CML figures show the fastest growth in buy-to-let investment over 2006, and the beginning of 2007 looks set to continue along the positive trend.
Across the UK, sustained tenant demand in late 2006 and early 2007 helped push rents achievable up by 0.4% in December and by a further 2.5% in January. Average annual rental incomes stood at £9,942 (£829 per month) in January, up from £9,665 (£805 per month) in November and £9,700 in December (£808 per month).
John Heron, managing director of Paragon Mortgages, said: "Activity in the overall housing market has been somewhat subdued over the New Year period, largely the effect of the seasonal slowdown. However, demand for properties in the private rented sector remains solid, which is feeding through into higher rents. Rents are up 2.9% on their level in November last year."
The south eastern part of England has seen particularly positive trends, with Greater London, the South East and East Anglia all benefiting from the strength of the capital's economy and a particularly good year for bonuses in the financial services sector.
East Anglia has seen especially strong growth in rents and yields - the region now having the highest average yield in the country (along with the South West and Yorkshire) at 6.4%. It also enjoys the highest total annual return (18.3%) at present - ahead of the North (16.9%) and the South East (16.0%).
Buy-to-let continues to benefit from concerns that the Bank of England will raise interest rates at least one more time this year, and younger people are choosing to enjoy the flexibility of rented accommodation for longer as they weigh up the future cost of a mortgage.
Heron adds that inevitably, this places further pressure on the supply of rented homes, with people who would like to purchase their own home holding off until the interest rate outlook becomes more certain. This demand is in addition to that generated by people who would in any event be unwilling to purchase a home, such as those who have recently arrived in the UK, students and young professionals.
"Fortunately, investors who understand the long term dynamics of the market are not spooked by recent modest rises in borrowing costs, and are continuing to grow their portfolios in response to growing tenant demand and rising rents," he notes.
02 March 2007 © 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.