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The latest report from Buy to Let Mortgages has revealed that gross yields from rental properties continues to rise as demand for properties remains strong.
Gross yields have increased across all types of buy to let properties in the last quarter (except for semi-commercial, eg flats above shops).
Across the last 4 quarters, multi-unit freehold blocks have seen the largest increase in gross yields, with an increase of 1.7%, from 7.1% to 8.8%. However it is Houses of Multiple Occupation that have see the largest rise in the last quarter, up 1.9% from 9.2% to 11.1%, having seen a dip in gross yields from Q1 to Q2.
According to the latest Mortgages for Business buy-to-let index, the cause of the increase was a combination of falling property prices and high tenant demand.
David Whittaker, Managing Director of Mortgages for Business, said: “The owner-occupier market is sinking deeper into the mire and is dragging property prices down with it. It’s great news for buy-to-let investors, who are able to snap up cheaper property, usually at a higher LTV because lenders are understandably willing to advance more when property prices are lower. It’s a fairly simple equation: suppressed property prices, plus strong demand for rented accommodation, equals higher yields for landlords. Investors are being canny and targeting areas where house prices are particularly squeezed. Anywhere outside the South-East is a particularly rich seam at the moment.”
According to the index, yields on vanilla buy-to-lets (standard buy to let transactions) increased from 6.1% to 6.7% over the quarter, which is largely attributed to the average property value of vanilla investments falling by 3% between Q2 and Q3 from £217,374 to £210,197.
The average LTV has also increased across all buy to let properties. The reason for this is not only an increase in the number of mortgage products available, but also the reduced price of housing encouraging lenders to loan more.
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