Rent rises drive strong yields for buy to let landlords in the UK

Average monthly rent rises with increased demand for rental properties

A 4.8% growth in the average monthly rent led buy to let investors across the UK to achieve a rental yield of 6.1% in 2011, according to new figures from BM Solutions.

Its latest research shows that strong demand for rental properties increased further last year, with the average monthly rent climbing to £716 in 2011 from £682 in 2010 as a result.

While 2011 rental yields were marginally lower than the previous year at 6.2%, they remained buoyed by continued rental increases across the UK.

Regionally, the highest rental yields in 2011 were in the North at 7%, the North West, Yorkshire and the Humber both at 6.3%, Wales at 6%, and the West Midlands and the East Midlands both at 5.9%.

Those areas with rental yields below the UK average included Greater London at 4.8%, the South West at 5%, the South East at 5.2% and East Anglia at 5.3%.

‘There is a very healthy demand for rental properties across the UK right now, which in part may be driven by the costs associated with buying a home, costs which, for some, will only increase as the stamp duty holiday comes to an end,’ said Phil Rickards of BM Solutions.

‘Average gross yields on a buy to let property have been just over 6% for the past two years, driven by growth in rental values. However, with house prices likely to remain broadly flat again this year, buy to let landlords can again expect little capital gain on their investment in 2012,’ he added.

The research also reveals that regional rental prices show significant variation. While the national average monthly rent increased by 4.8% overall, there are more significant gains in regional areas. The largest increases were 8% in East Anglia and 6.9% in the North. The South East and Greater London recorded rises of 5.8% and 5.6% respectively but rents increased by just 0.1% in Wales and 0.7% in Scotland.

Average rents in London were more than twice the national average. The average rent in Greater London remains significantly higher than elsewhere in the UK, at £1,212 per month. The average monthly rent in the capital is 69% higher than UK average of £716 and 41% above that in the South East which is £858, the next highest region.

The lowest average rents are in Wales at £474 per month while the North and Yorkshire and the Humber were both £488 per month.

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