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Buy-to-let yields spring upwards, claims Paragon

Buy-to-let yields have stopped their downward slide of the last six months with a significant upturn in April, according to Paragon Mortgages.

Its buy-to-let index claims that yields rose to 7.22 per cent from 7.12 per cent, which would represent a major shift for a single month.

Paragon attributes the boost to landlords achieving higher rents, on average making a 6 per cent gain against a 4.5 per cent rise in property values as demand grew for rented accommodation.

The index claims that average property prices paid by landlords rose by 4.5 per cent last month to £133,658 from £127,643.

Although Paragon says landlords are frequently able to negotiate better prices than owner-occupiers, it believes the fact that they are prepared to pay more demonstrates that tenant demand is strong and they are optimistic for the future of the market.

It says landlords expect to increase their portfolios by 10.1 per cent to an average of 13.1 properties over the coming year.

Managing director John Heron says: “Rising property prices mean that investors are benefiting from good capital appreciation on their existing property portfolios. We have seen total returns rising strongly from an average of less than 20 per cent in January to over 30 per cent this month.”

The highest overall return was in the East Midlands, where landlords have generated a return of 55.6 per cent on a typical property bought 12 months ago. Wales and East Anglia produced returns of 47.2 per cent and 45.3 per cent respectively.

Heron says: “Even the lowest-yielding regions gave yields of around 25 per cent or more, a pretty good return on your investment over a period in which interest rates were consistently below 5 per cent.”

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