This represents the biggest increase since March 2004. Average property values are now £145,331, as compared with £141,765 in August and just £133,658 back in March. Year-on-year, landlord property prices are 16.0% higher than a year ago.
Landlord rental incomes also rose in September by 0.9% from £9,524 to £9,606 and are now 0.9% higher than they were 12 months ago. Despite the increase in rentals, the rise in property prices led to a slight easing of rental yields to 6.61%.
In September property values continued to rise in seven of the regions, with the North West up sharply by 7.1% to £104,250 the South West and the East Midlands up 5.6% to £191,203 and £142,653 respectively. Smaller rises were seen across the remaining regions except the North, Wales and East Anglia, where prices fell slightly.
John Heron, managing director of Paragon Mortgages, says: “Landlords have been paying more for their investment properties, but it must be remembered that these statistics are based on completions and that other lead indicators would suggest that price inflation is now easing. Despite the rise in prices, buying activity by landlords remains at healthy levels, reflecting landlords’ sustained confidence levels in the prospects for buy-to-let.”
Sources: www.hbosplc.com and www.nationwide.co.uk Average house price, Sep 04 12 month change
Sep ’03 ‡ ’04 Average change over past three months Change over past month
Paragon buy-to-let £145,331 16.0% 5.4% 2.5%
Halifax £162,911 20.5% 2.0% 1.4%
Nationwide £153,727 17.8% 1.5% 0.2%
Year-on-year, the rate of increase of landlord property values has grown, from 15% in August to 16% in September. Paragon’s data continues to show annual house price inflation for investors at lower levels than the latest figures published by Halifax and Nationwide, suggesting that overall landlords continue to negotiate better deals on properties than owner-occupiers.
As a result of rises in property values over the past couple of months, yields have slipped slightly in recent months. On average, landlords are achieving a yield of 6.61% gross from their investment properties.
Yields continued to ease across most of the regions this month. The East Midlands saw the greatest increase in yields for the second month in a row, to 7.41%, up from 7.20% in August and 6.89% in July. The South West also saw an increase in yields, up 1.1% to 6.92%. The East Midlands overtook the North as the highest yielding region, with an average yield of 7.41%. Yorkshire remains in second place for the second month in a row, with a yield of 7.28%. Yields in the North are now at 7.25%. Although rental incomes are highest in Greater London and the South East, yields are lowest due to higher property prices.
Region September 2004 August 2004 July 2004
TOP YIELDS
(property values)
East Midlands 7.41%
(£142,653) 7.20%
(£135,066) 6.89%
(£132,644)
Yorkshire 7.28%
(£108,092) 7.31%
(£107,440) 7.41%
(£103,651)
BOTTOM YIELDS
(property values)
South East 6.28%
(£157,862)
6.28%
(£156,309) 6.50%
(£164,455)
Greater London 5.99%
(£238,002)
6.29%
(£226,732) 6.43%
(£225,370)
This month, the highest overall return on investment occurred in the West Midlands, where landlords have generated a return of 55.2% (on a typical property bought 12 months ago) - a total of £51,913, comprising £44,063 in capital appreciation plus £7,850 in rental income, on a property worth £93,976 at purchase. Wales also produced returns in excess of 40%.
Property Value September 2003 Property Value Appreciation Rental Income August 2003 Total Gross Return Return on Initial Investment
West Midlands £93,976 £44,063 £7,850 £51,913 55.24%
Wales £85,483 £29,529 £7,521 £37,050 43.34%
North West £80,351 £23,899 £7,650 £31,549 39.26%
North £56,140 £15,874 £5,377 £21,251 37.85%
East Midlands £111,026 £31,627 £8,167 £39,794 35.84%
South West £153,388 £37,814 £11,552 £49,366 32.18%
Yorkshire £92,860 £15,232 £7,827 £23,058 24.83%
East Anglia £117,407 £10,465 £8,877 £19,342 16.47%
South East £144,361 £13,501 £10,281 £23,782 16.47%
Greater London £230,196 £7,805 £15,623 £23,429 10.18%
National £125,246 £20,086 £9,521 £29,607 23.64%
John Heron continues: “Total annual returns generated by landlords are very healthy, with northern and western parts of the country doing particularly well. Star performers in terms of regions this month are the West Midlands and Wales, the North West and North, where landlords have been making around 40% or more on their investments.”
