|
Demand for rented homes to soar
January’s interest rate rise added another push to discourage many aspiring first-time buyers from getting onto the housing ladder, but will have a much more positive impact on hundreds of thousands of buy-to-let landlords who provide rented accommodation to those who are unable or unwilling to purchase their own home, according to Paragon Mortgages.
Paragon Mortgages’ January buy-to-let index reveals that rental yields achieved by residential investors have remained steady at 6% for the past eight months.
The year has started on a positive trend, and the buy-to-let market is set to remain strong as rising interest rates put increasing pressure on hard-pressed first time buyers.
John Heron, managing director of Paragon Mortgages, said: The private rented sector fills a key role in the housing market by providing decent, affordable accommodation for a growing number of households. In particular, people who need flexibility before they settle down or who are unable to afford to purchase their own home tend to resort to privately rented accommodation.
With high property prices and rising borrowing costs, more and more would-be home owners will choose to live in rented homes for longer while they save a large enough deposit.
With landlords’ average gearing standing at less than 40%, down from 48% five years ago, the vast majority of those who are on variable rate mortgages are well equipped to take this and any further interest rate rises in their stride.
Highlights from the index
|
Average Rental Incomes
= £9,700 |
Average Rental Yield
= 6.0% |
Average Landlord Property Value
= £162,776 |
|
Change over month = 0.4% |
Change over month = 0.0% |
Change over month = 0.3% |
|
Change over year = -6.4% |
Change over year = -0.4% |
Change over year = 0.8% |
- Rental yields have remained stable at 6.0% for the fourth consecutive month. Regions with the highest yields in December were Wales, the South West and the North West, all with yields of 6.3%.
- Average national property value rose 0.3% from £162,304 in November to £162,776 in December. The region with the highest property value is London (£289,558), followed by the South West (£190,635) and the South East (£178,007).
- Average rental incomes rose from £9,665 in November to £9,700 in December a monthly increase of 0.4%.
- The regions with the highest rental income in December were London (£16,389), the South West (£11,990) and the South East (£10,376).
- Total returns this month stood at 7.2%.
- In December the region with the highest total returns on a property was the South East (16.1%), followed by the West Midlands (13.5%) and the South West (11.4%).
|