Buy-to-let investments are providing higher gross yields despite rising property prices. This is the tenor of Mortgages for Business' Complex Buy-to-Let (BTL) Index.
According to the index, standard residential properties increased their yields by 6.3% in the three months to the end of September, up from 6.1% in the previous quarter. HMO properties, which are especially popular with student tenants, showed even more improved yields.
Gross yields tend to fall as property prices rise, but the fact that they are keeping up is taken as an indicator of the strong rental market.
At the same time, the Landlord Centre has found that BTL investors are purchasing more expensive properties with the average price stopping just short of £170,000 over the last quarter, an increase of over £7,500 compared to the period from April to June.
Apart from increased confidence and consistently high yields, competitive mortgages with low interest rates are cited as the main reason for investors to spend more. The research also showed that student properties performed better than other types of residential properties.
Whilst there is a plethora of news about the sector each day, the overwhelming trend has remained the same for a number of months: property prices are rising, but rents are keeping up. And despite more property sales, a large number of people remains keen to rent long-term, giving investors the security to be able to make long-term decisions about their properties.
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