Buy-to-let investors earned an average gross rental yield of 5.2 per cent in the second half of 2017, according to figures from BM Solutions.
However, with annual consumer price inflation averaging 2.9 per cent in the same six-month period, BM Solutions calculated landlords were provided with a real return of 2.3 per cent on their investment, down from 4.3 per cent in the six month period to the end of 2016.
The data found that during the same period, they were earning an average rental income of £7,502 a month from their property.
A distinct North-South divide prevails with the highest yields in the north (6.9 per cent), followed by Northern Ireland (6.2 per cent) and then the north west, Yorkshire and the Humber and Wales (all 6 per cent).
The lowest rental yields were in London (4.5 per cent), followed by the south east and the south west (both 4.8 per cent).
The average rent in Greater London remains significantly greater than elsewhere in the UK, at £1,540 per month, but London was the only region to see rents fall in the last six months of 2017 compared with the same period in 2016.
Average Rental Yield and Income by Region
Region | Gross Rental Yield H2 2016 | Gross Rental Yield H2 2017 | Average Monthly Rental Income H2 2016 | Average Monthly Rental Income H2 2017 | Change in average monthly rents H2 2016 - H2 2017 (£) | Change in average monthly rents H2 2016 - H2 2017 (%) |
East Anglia | 5.2% | 4.9% | £728 | £777 | £50 | 6.8% |
East Midlands | 5.6% | 5.4% | £619 | £649 | £30 | 4.8% |
Greater London | 4.4% | 4.5% | £1,591 | £1,540 | -£51 | -3.2% |
North | 7.0% | 6.9% | £513 | £531 | £19 | 3.6% |
North West | 6.4% | 6.0% | £577 | £604 | £27 | 4.7% |
Northern Ireland | 6.5% | 6.2% | £437 | £452 | £15 | 3.4% |
Scotland | 6.5% | 5.8% | £604 | £627 | £23 | 3.9% |
South East | 4.9% | 4.8% | £1,095 | £1,097 | £2 | 0.2% |
South West | 4.9% | 4.8% | £833 | £873 | £40 | 4.8% |
Wales | 6.1% | 6.0% | £550 | £561 | £11 | 2.0% |
West Midlands | 5.6% | 5.5% | £647 | £660 | £13 | 2.0% |
Yorkshire and the Humber | 6.2% | 6.0% | £519 | £550 | £31 | 5.9% |
UK | 5.3% | 5.2% | £766 | £750 | -£16 | -2.0% |
Source: BM Solutions
The average monthly rent in the capital is 105 per cent higher than the UK average of £750 and 40 per cent more than that in the south east (£1,097), the next highest region.
Northern Ireland has the lowest rent in the UK, at an average of £452 a month, just over a quarter of the London average.
Market data for buy-to-let property purchases with a mortgage in the second half of 2017 showed transactions remaining broadly stable at 38,4003, up slightly by 100 transactions compared to the second half of 2016.
This followed a period of distortion in the market where many landlords brought forward purchases at the end of 2015 (65,100 for the latter half of that year) before the changes in stamp duty rules came into effect and subsequent sharp drop in transactions in 2016 (second half was 38,300).
Overall, buy-to-let purchases with a mortgage in 2017 were 27 per cent lower than in 2016 at 74,900.
Transactions are now 59 per cent below the pre-housing downturn peak of 183,280 recorded in 2007 but 52% higher than the market dip of 49,400 in 2010.
Phil Rickards, head of BM Solutions, said: "At the end of last year, landlords will have seen rental yields remaining broadly stable.
"However, taking into account stamp duty changes in April 2016, the loss of tax relief on mortgage costs and the tighter regulation of affordability assessments, combined with higher prices, it’s not surprising that landlords in the southern regions and London are seeing the lowest yields.”
"More broadly, the market is holding up well following this period of change, which also included new rules for portfolio landlords introduced last year. In the second half of 2017, the market saw a small increase in transactions compared to the same period the previous year."
But a study from estate agents Your Move found London rents continued to buck a rising trend last month, with the average property rented for £1276 a month, down 0.3 per cent in the last year.
