North East tops income yields for buy-to-let landlords

Buy-to-let income yields 5.2% in North East

Buy-to-let landlords are receiving lower yields than a year ago, with typical yields of 4.9% reported in Your Move’s latest buy-to-let index.

The figure indicates that yields are down across England and Wales, with the North East faring best, with a return of 5.2%, followed by the North West on 5.0% and Wales on 4.7%, while yields in London (3.2%), the South West (3.3%) and the South East (3.4%) showing the lowest yields since 2016.

The figures take into account rental increases – according to Your Move, every region saw year-on-year rental rises except from the South West, with Wales showing the biggest rise at 4.3%, followed by the South East at 3.6%.

The data also reflects the impact of government measures, which have added thousands of pounds of additional costs for landlords, with the introduction of the 3% stamp duty surcharge and the phasing out of mortgage tax relief affecting returns.

Richard Waind, director at Your Move, said:

The private rental sector… could still be seen as an attractive opportunity for investors, with the North East and North West in particular seeing strong growth.

Andrew Turner, chief executive at Commercial Trust, stated:

It comes as no surprise that buy-to-let yields have been lower over the past 12 months as government changes have significantly added financial burden to landlords.

Next month will see the second phase of PRA rules come into effect from September 30th, which will include changes to the way portfolio landlords are underwritten and could see the cost of borrowing on buy-to-let properties increase from lenders.

Despite these punitive costs and the forthcoming changes, the latest figures clearly illustrate that there is still a good return to be made from buy-to-let, with areas like the North East and North West offering plenty of potential. Rental demand remains high across the UK.

As buy-to-let investors prepare for the new PRA changes, there remain plenty of people that retain faith in the value of bricks and mortar and with the prevailing low level of interest rates, property remains a viable investment proposition for many.

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This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.