Buy to let landlords are still optimistic about the market as tenant demand stays constant despite the threat of rising mortgage interest rates.
The message comes from a survey by leading buy to let lender BM Solutions.
The research revealed 42% of buy to let landlords reported strong tenant demand in the past year, while more than a quarter are planning to invest in more rental property.
A deep analysis of the buy to let market across the country found that:
- 44% of landlords picked up a gross rental income of less than £20,000 last year
- Landlords with portfolios of four or less rental homes paid an average £10,335 a year on buy to let mortgage repayments in the year
- The average buy to let portfolio is 6.5 rental homes worth £1,031,000. This average portfolio generates £48,000 a year in gross rents with an average of £20,950 going on mortgage repayments
The highest demand from tenants is in the South East and outer areas of London, while the least demand is in the North East, the study reports.
The best region for yields is Yorkshire and Humberside, where buy to let properties are returning 6.8%.
London has the worst yields of around 5%.
Phil Rickards, head of BM Solutions, said: “While the latest official figures show a degree of uncertainty creeping into the outlook for the economy as a whole, the future looks optimistic for landlords as many are reporting increased tenant demand and more than a quarter are planning to expand their portfolios.
“There is further evidence of a North-South split, with tenant demand greatest in the South East and London, whereas the greatest yields are to be found in Yorkshire & Humberside, Scotland, and the North East.”
In effect, the report shows landlords are spending between 40% and 50% of their rental income servicing buy to let mortgages and that higher prices in the south are pushing down yields for landlords in and around the capital.