London rental yields lag behind rest of UK
The average rental yield in quarter two this year stood at 6.2% while rental yields in London produced a lower return of 5.7%.
The most profitable regions were the North West, North East, West Midlands and Wales which all produced yields of 6.4%.
Phil Rickards, head of BM Solutions, said: “London has long been seen as the centre of the rental market with demand outstripping supply and the shortest void periods.
“However, for the greatest return looking further afield maybe just as an attractive option with rental yields clearly higher out of the capital.”
Of those landlords surveyed, 42% have seen rents increase in the areas where they let over the last 12 months, down 3% from Q1 2014.
Following a similar trend just a quarter (26%) of landlords are planning to increase rents across their portfolio in the next six months, down 2% from the start of the year.
But Landlords should be wary of chasing after cheap properties for sale in ‘up and coming’ areas which promise high gross rental yields.
Lettings consultant David Lawrenson said that while these opportunities are tempting, landlords should be wary of the pitfalls.
“If you are a new landlord starting out then you should be very wary of buying for income in depressed areas. Avoid them unless you are comfortable banking on some real regeneration and improvements coming along to turn things around.”
He added: “There is always a reason why the property is so cheap and gross yields high. It is usually because the area has few prospects for economic growth and consequently little chance of capital and rental appreciation.”
Half of landlords responding to the BM Solutions survey said their prospect for capital gains over the next three months was either ‘good’ or ‘very good’, up 50% year-on-year.
Typically, landlords reported spending a quarter of their rental income on maintenance costs.