Buy-to-let yields hit 6.2%

10 August 2012

Buy-to-let investors enjoyed an average yield of 6.2% in June, up from 6% a year ago, driven primarily by an increase in rents.

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.

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