Buy-to-let yields hit 6.2%
The figures, from Lloyds Banking Group's specialist buy-to-let arm BM Solutions, show that the highest yields on offer are available in the North of England, where investors benefit from a 7% average annual return.
The North West, Yorkshire and Humberside, and Wales are also high yielders at 6.5%, 6.5% and 6.2% respectively.
Due to higher house prices, the lowest yields are in the South, with London property returning only 4.8% a year.
The research from BM Solutions found that the average monthly rent increased from £697 a month in June 2011 to £734 a month in June of this year, a rise of 5.3%.
Rents are rising the fastest in London, with the average tenant in the capital spending £1,287 a month. This means rents in the capital are 75% more than the national average.
Phil Rickards, a senior manager at BM Solutions, says rental growth has been a "key factor" in pushing up property yields.
"There have been significant regional variations with the biggest rise in average rents taking place in London, where demand for rental accommodation has been particularly strong," he says.
Rickards adds: "While rental yields have remained steady over the past year, it should be noted that these figures do not take into account the time when properties are vacant - which can impact the average yields. Despite the encouraging figures, it's still really important for any potential investors in the market to do their homework and seek expert advice first."
The news follows the Council of Mortgage Lenders' lending figures, which show that buy-to-let lending jumped 18% year-on-year.
This article was taken from our sister publication, Money Observer.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.