According to figures published this week by the Association of Residential Letting Agents (ARLA), houses in the North West of England are now giving the highest rental returns in the country, considerably better than central London.
These rental returns are the income generated (yield) from capital investment made by landlords in buy-to-let property. This data from the ARLA Members Surveyed cover Quarter 2 of 2013, and is drawn from 507 member offices throughout the UK. This, together with the additional ARLA Survey of Residential Investment Landlords in June 2013, consulting 1,224 landlords, the report forms the basis of the ARLA Review and Index.
The Review and Index is available at:
The rental returns in the North West have consistently topped 6% whilst Scotland, Northern Ireland and Wales have shown not quite as high but steadily rising returns as well.
On the contrary, the survey found that rental returns on central London houses have been falling over the last six months. ARLA’s figures tend to agree with other surveys conducted recently pointing to average returns at around the 4% mark, and falling to 3.5% over the same period.
The high demand from purchasers of central London property is having the inevitable consequence of compressing rental yields, so London may not be the best place to invest money at present.
According to ARLA the average value of a rental house in London is around £1,251,000 which compares to just £173,000 in the Midlands and £197,000 in Scotland, Wales and Northern Ireland.
Flats, it appears follow a similar pattern across the country with central London properties achieving 4.1%, compared with returns of 5.2% in the North east and 5.8% in the North West respectively.
The survey indicated an average void period of three weeks across the UK, which shows the current general good health of the private rental market and perhaps the reason for the continued investment in, and the rapid growth of buy-to-let.
However, other surveys have indicated huge variations in rental demand in different parts of the country, and indicate that extreme caution by investors is needed in areas of high unemployment.
Commenting on the results of the survey, Ian Potter, managing director of ARLA, thought that landlords around the UK should use caution and “choose their rental property wisely to ensure they receive the returns they expect”.
By Tom Entwistle