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During the second half of 2017 buy to let investors earned an average gross rental yield of 5.2 per cent, according to new research by BM Solutions.
Despite this, investors saw a 4.3 per cent decline in real returns in comparison to the six-month period at the end of 2016. Annual consumer price inflation averaged 2.9 per cent in the second half of 2017, leaving landlords with a real return of 2.3 per cent of its investment. Landlords were earning an average rental income of £750 per month from their property.
There was an evident North-South divide, with the highest yields in the North at 6.9 per cent, followed by Northern Ireland at 6.2 per cent. The North West, Yorkshire and the Humber and Wales all stood at 6 per cent. The lowest rental yields are found in London at 4.5 per cent, followed by the South East and the South West each at 4.8 per cent.
The average rent in Greater London stood significantly higher than elsewhere in the UK, at £1,540 per month. However, London was the only region to see rents fall in the last six months of 2017 compared to the same period in 2016. The average monthly rent in the capital is 105 per cent higher than the UK average of £750. It stands at 40 per cent above that in the South East which offers rents of £1,097.
Head of BM Solutions, Phil Rickards, said: ‘At the end of last year, landlords will have seen rental yields remaining broadly stable. However, taking into account stamp duty changes in April 2016, the loss of tax relief on mortgage costs and the tighter regulation of affordability assessments, combined with higher prices, it’s not surprising that landlords in the southern regions and London are seeing the lowest yields.’
He continued: ‘More broadly, the market is holding up well following this period of change, which also included new rules for portfolio landlords introduced last year. In the second half of 2017, the market saw a small increase in transactions compared to the same period the previous year.’