Returns from buy to let investment at their highest for over a year

Returns from buy to let properties have risen to their highest level in over a year. 

Data from Your Move and Reeds Rains shows - taking into account both rental income and capital growth - the average landlord in England and Wales has seen total returns of 12 per cent over the twelve months to January. 

In absolute terms this means that the average landlord in England and Wales has seen a return of £21,988 over the last 12 months, before deductions. Of this, the average capital gain contributed £13,594 while rental income made up £8,394.

Rental yields have so far proved resilient in the face of price rises. 

The gross yield on a typical rental property in England and Wales, before taking into account factors such as void periods, is steady at 4.9 per cent in January, the same as in December 2015. On an annual basis, this is fractionally lower than the 5.0 per cent gross yield seen a year ago in January 2015.

“Right now the big shift is likely to be in favour of existing landlords, potentially at the expense of those planning to start up as a landlord for the first time or expand their portfolio. As such, it will be interesting to see how the rental market responds if there is a disruption to investment in supply” cautions Adrian Gill, director of estate agents Reeds Rains and Your Move.

“But this is likely to be a short-term effect. Over the longer term there is a consistent and developing lack of housing for across all tenures, for a spiraling population. Owners and renters alike will see the cost of somewhere to live continue to rise, whether expressed in rents or prices. Stamp duty surcharges could funnel more money from the industry to the Treasury, but ultimately will not change the level of demand from tenants” he insists.

On a regional basis annual rent rises are now led by the East Midlands and East of England, with rents up 5.9 and 5.8 per cent respectively since January 2015. 

This pushes London to third place on this measure, with rents in the capital 5.7 per cent higher on an annual basis, marginally slower than 6.3 per cent in the capital in December.

At the other end of the spectrum rents are lower than a year ago in the South East and North East regions, both seeing a 1.0 per cent annual fall. Meanwhile the slowest annual rent rises are in Wales, up just 0.6 per cent since January 2015.