Average UK rents, which were rising have now stabilised just short of £1,000 a month, and remain 9.3% higher than a year ago. The highest yields at present can be found in Wales (7.6%), the North (7.4%) and the North West (7.3%). This may be a reflection of the perceived less attractive capital growth prospects in these areas compared to the rest of the UK.
Currently returns remain attractive and strong tenant demand should encourage landlords to retain property, whilst also leading to opportunistic purchases. With the average portfolio gearing at less than 40% landlords have an opportunity to gear up investments.
John Heron, managing director of Paragon Mortgages, commented that: ‘For the vast majority of landlords, a slow housing market is nothing new. They recognise the counter-cyclical nature of buy-to-let and many landlords have held property through previous housing cycles. Falling prices are spooking first-time buyers and they are delaying house purchase, with tenant demand at high levels as a result.'
‘During the downturn of the early 1990s we witnessed mass repossessions because there was little alternative to house purchase and young buyers had borrowed above their means. Today's modern and vibrant private rented sector provides people with a viable alternative to owner occupation and buy-to-let provides housing for young people who would otherwise have little choice but to buy and be financially stretched.'
