Paragon Mortgages monthly buy-to-let index says house prices continue to rise in line with renewed activity in the market but rental incomes are falling.
The index shows a 1.43 per cent rise in landlord property values in July following a 5.54 per cent increase in June. The average property now costs landlords £119,587 compared with £117,902 in June and is over £10,000 or 9.3 per cent more than three months ago when the average was £109,393.
But rental incomes fell by 0.85 per cent after a 2.79 per cent rise in June, with average yields achieved by landlords falling to 7.57 per cent from 7.75 per cent in May.
The North is still seeing significantly higher yields than the South at 10.36 per cent compared to 6.56 per cent in Greater London.
In terms of overall combined yield and increase in price, the East Midlands saw the highest gross returns of 56.66 per cent followed by Wales at 46.59 per cent and the West Midlands at 43.85 per cent.
Managing director John Heron says: “Although rental incomes achieved by buy-to-let landlords slipped slightly this month, they remain rather higher than they were for most of the first half of 2003 and tenant demand is still very strong. Landlords are responding to this demand by building their portfolios but, of course, they are in competition with owner-occupiers who are coming back into the market and helping to push prices up again.”