20 things

20 things you need to know about the buy-to-let index

1 July 2006

• Paragon Mortgages Buy-to-Let Index for June revealed the typical landlord earned a gross rental income of £849 per month on each property in May, a rise of 0.8 per cent from April’s findings.
• The research revealed landlords earn an average gross rental income of £10,189 per year, rising from the April findings of £10,113.
• Paragon Mortgages buy-to-let findings also revealed a rise in investment property prices, rising to £168,935 in May from the March total of £164,247.
• The research also revealed the price at which landlords purchase property rose 7.7 per cent over the past 12 months.
• According to the Index, average rental yields stood at 6 per cent for May.
• The East Midlands and the North West retain their title as the regions with the highest rental yields, at 6.6 per cent. Greater London recorded the lowest rental yields.
• Despite achieving the highest yields, property prices in the East Midlands and the North West were 19.2 per cent and 25.1 per cent respectively below the national average.
• Based on total return for the capital, taken from property value appreciation and rental income figures, London generated the highest return, at 36.3 per cent on a typical property purchased 12 months ago.
• Nationally, total returns remained static from the April Indices findings, at 14.4 per cent.
• Regionally price averages in Greater London reached £327,139, while the South East recorded property price averages of £184,087. However these regions recorded the lowest rental yields.
• Research on property types revealed detached properties in May recorded rental yields of 6.1 per cent, while semi-detached properties achieved rental yields of 5.9 per cent.
• Flats achieved rental yields of 5.6 per cent, with the average rent reaching £9,263 for the year.
• According to the research, flats increased in value by 1.5 per cent from April’s findings, reaching £165,485.
• Terraced properties achieved average prices of £147,054, with the average rental yield reaching 6.4 per cent, a fall of 2.4 per cent from the April findings, Paragon’s Index revealed.
• Commenting on the findings, John Heron, managing director at Paragon Mortgages, said: “With rents stable, tenant demand healthy and market confidence solid, landlords continue to purchase new properties in a generally upward moving property market. Investor activity has been increasingly strong over the past nine months.”
• He continued: “Property investors are dispassionate purchasers and only buy in response to growing tenant demand, rather than in the expectation of short-term capital appreciation. They purchase properties in locations where they believe that tenant demand will remain sound over the medium to long-term, and pay particular regard to factors such as local amenities, transport links and the individual preferences and expectations of the people who are likely to want to rent the property.
• Heron concluded: “Landlords are experiencing solid demand for rental properties as economic conditions in the UK remain sound and Bank of England (BoE) interest rates are stable. There is a long-term structural shortage of good quality residential property in the country, and demand for it is growing steadily. In addition to the demographic growth in the number of households, there is a steady influx of migrant workers, who tend to choose rented properties for their accommodation needs. Over the next five to 10 years, the private rented sector is expected to grow steadily on the back of a stable economic environment in the UK.”
• Paragon Mortgage’s Buy-to-Let Index is compiled every month from the lender’s mortgage book data for the country.
• The Index research takes into account rental yields, landlord property values and rental incomes.
• The figures for Paragon’s monthly Index are weighted by region and property type. However, they are not seasonally adjusted, with each months report based on mortgage lending up to the last day of the preceding month.