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Buy-to-let benefits from high rental yields
25 June 2008 10:30
Rental yields rose to their highest levels in over two years last month despite falling rents, according to new figures, illustrating the strong fundamentals of the buy-to-let sector.
Average rental incomes dipped by 0.8 per cent from April to £11,952 in May, Paragon's data showed, while average landlord property prices also fell by 1.4 per cent in this time, but they were both up year-on-year, by 11.7 and 7.5 per cent respectively.
Meanwhile, average rental yields increased to 6.4 per cent, compared to 6.3 per cent in April and 6.1 per cent in May 2007, although total returns dropped for a second consecutive month, from 16 to 13.6 per cent.
Regionally, the highest rental yields are available in Wales, at an average of 7.6 per cent, while the top annual rents can unsurprisingly be found in Greater London at an average of £19,834 and the best total returns are on offer in the south-west at 26.1 per cent.
Paragon's managing director John Heron explained that with rents high and property prices down, landlords can attain better yields with buy-to-let than via other investments, while low gearing on their portfolios leaves them perfectly placed to expand them.
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