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Buy-to-let yields starting to slide

Returns on buy-to-let properties fell slightly in the last quarter of 2002, says the Association of Residential Letting Agents.

Its second quarterly analysis of buy-to-let lending by Arla members, Birmingham Midshires, GMAC-RFC, NatWest, Paragon and Standard Life Bank shows that the rate of return on the total cost of a buy-to-let investment fell to 9.52 per cent in the last quarter of 2002 from 9.62 per cent in the previous three months.

The return on an initial cash investment of a deposit of 25 per cent of the total value of a property fell to 18.89 per cent from 19.14 per cent.

The North-west was the only area to show a rise in rental yields in the fourth quarter of last year, with the annual rate of return on the initial cash investment rising to 26.32 per cent from 25.6 per cent. This compares with a fall in Central London to 21.96 per cent from 22.44 per cent and in Greater London to 22.6 per cent from 23.43 per cent.

Looking at Scotland, Wales and Northern Ireland as a whole, returns fell to 25.03 per cent from 25.81 per cent.

Arla director John Crossley says: “As the Arla indices build the investment picture each quarter, they will become the most important guide for buy-to-let investors, letting agents, financial advisers and mortgage lenders.”

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