Buy-to-let investors earned an average gross rental yield of 5.3 per cent in the second half of 2016, despite a considerable slowdown in the market.
With annual consumer price inflation averaging just 1 per cent during the same period, landlords earned a real return of more than 4 per cent on their investment and an average rental income of £766 per month, according to BM Solutions data.
In the North, yields were as high as 7 per cent, followed by Northern Ireland (both 6.5 per cent) and the north west (6.4 per cent).
London, in contrast, saw the lowest rental yields (4.4 per cent), followed by the south east and the south west (both 4.9 per cent).
At £1,591 per month, rents remained greatest in Greater London, 45 per cent more expensive than the south east (£1,095), which is the next-highest region, and 108 per cent above the UK average.
The news comes amid a sharp slowdown in the buy-to-let market following changes to stamp duty rules and the tax-deductible nature of mortgage payments for landlords, with transactions falling by 41 per cent from 65,100 in 2015 to 38,300 – the lowest six-month figure since the first half of 2013.
Phil Rickards, head of BM Solutions, said: “Rental yields remain strong, still offering investors high real returns.
"Typically buy-to-let investors in northern areas tend to benefit from lower property values providing higher yields, whereas southern regions have the lowest yields given the higher housing costs.”
Michael O’Brien, director at Dagenham-based Access Financial Services, said buy-to-let remains a strong investment option.
He said: “The will of the people to own a second property has not diminished due to the tax changes, but that could be due to naivety for some people due to a lack of information. Over the next few years, you could see a shift.
“We are still educating people about the changes – but even once we inform them, they have made their decision, they are aware and they are not waived to come off the path because the attraction outweighs the negatives in terms of income. They are looking at long-term growth.
“In terms of the yield changes, that potentially is due to a number of landlords coming out of the market temporarily, leading to a shortage of supply.”
simon.allin@ft.com
