Buy To Let Updated:
Landlords are still enjoying a total annual return of 10.3% from the average property despite returns dropping from the previous month.
According to the latest Buy-to-Let Index from LSL Property Services, the figure has slipped from 11.3% in the year to June, but it still remains significantly higher than the average return of 6.1% posted a year earlier.
In terms of pounds and pence, this means the average landlord in England and Wales has seen a return, before any mortgage payments or other deductions, of £17,307 in the last 12 months. This is made up of rental income of £8,168 and an average capital gain of £9,140.
Looking ahead, if rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 8.5% over the next year, equivalent to £15,050 per property.
"Most encouraging for landlords considering future investments will be the stability of rental yields over the last six months," said David Brown, commercial director of LSL Property Services. "The second half of 2013 saw yields dip back from record highs towards the long-run average of 5%. But so far this year we've witnessed an astounding consistency from gross yields. This indicates a healthy relationship between property values and rental income – though landlords must always pay attention to the all-important local factors that lie beneath this average."
Elsewhere in the survey, it was revealed that rents have risen in real terms for the first time in 14 months.
The average residential rent across England and Wales is now 2.0% higher than in July 2013, currently standing at £753 per month. This is the same absolute level as in November 2013, and is up from an average of £738 per month in July 2013.
Rents are just 0.1% higher than a year ago after consumer price inflation of 1.9% – the first real-terms increase since September.
"Tenants looking to rent a new property this month still need to budget the same as they would have in November. At a time when the UK is facing a serious shortage of homes, and with purchase prices rising steadily, that is an immense achievement for the private rented sector.
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