Investors located in the northern regions of the country continue to benefit from higher average total returns than those in southern parts, with the four northerly regions – covering the country roughly from the Mersey to the Wash – taking the top four places in terms of overall return (i.e. capital appreciation plus rental income).
Yorkshire has consistently provided the highest overall return every month so far this year, while the North West has been in second place since February. The East Midlands and the North, respectively third and fourth, have strengthened their positions relative to more southerly
In Yorkshire, average returns are 57.8%, while in the North West they are 44.0% and in the East Midlands 39.3%. The North stands at 28.1%. These figures compare with an average for the country as a whole of 18.7%.
Comments John Heron, managing director of Paragon Mortgages: “As property values in northern areas have generally held up better than those in southern parts, so overall returns have remained stronger. Yorkshire, for example, has had an almost uninterrupted trend of rising house prices over the past 12 months, while the North West has seen increases in 9 out of 12 months.”
As well as seeing high levels of capital appreciation, northern regions continue to register rather better yields than more southerly ones: the East Midlands was highest at 8.0%, followed by the North West (7.6%) and Yorkshire and the North (both 7.2%).
Indeed, the month saw an increase in yield in the East Midlands, the West Midlands, East Anglia and North West, but saw an easing in other regions. As a result, average yields slipped very slightly across the country.
Nationally, prices continued to stabilise this month, reaching £152,622. This equates to a fall in the annual rate of increase in property values from 23.9% in January to 11.4% in April. Even so, Paragon’s annual rate remains rather higher than the latest figures reported by Halifax (5.9%) and Nationwide (1.1%).
John Heron concludes: “This month’s figures show a distinct north-south divide. Total returns, property values and yields are mostly higher in northern regions, most notably Yorkshire, while southern regions continue to see lower property values and yields. Having said that, confidence among landlords remains sound and they continue to be cautious buyers as and when they identify suitable properties that meet tenant demand.”
In terms of property type, terraced provide by far the highest yield to landlords, at an average of 7.3% nationally. This compares with 6.9% for detached and 6.8% for semi-detached.
“This illustrates our experience that demand from tenants is strongest for modest properties at the lower end of the price spectrum – and that is precisely what the terraced house tends to offer, up and down the country. It’s no coincidence that the property type that yields the best return to landlords is also the cheapest,” concludes John Heron.
