Impressive rental returns of 6.7% in the East Midlands see its landlords buck the national trend of selling up
- Landlords in the East Midlands are achieving an average yield of 6.7%
- Thirteen per cent have bought properties in the East Midlands in the past month
- It compares to 11% who have sold in the area during the same time frame
Landlords are achieving attractive rentals yields of almost seven per cent on average in the East Midlands, new figures suggest.
It has prompted landlords in the area to stick with their property investments rather than follow the national trend of selling up, according to lender Paragon Bank.
It comes despite a number of tax and regulatory changes that has prompted some landlords to consider whether it is worthwhile continuing with their investments.
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The survey by Paragon asked 680 landlords about their property investments and found that those in the East and West Midlands are still picking up new rental properties.
A total of 13 per cent have bought properties in the East Midlands during the past month, compares to 11 per cent who have sold.
In the West Midlands, the figures are 11 per cent and 10 per cent respectively, which also results in a positive net change.
All other regions in the country saw more landlords sell properties than purchase them, with central London seeing the biggest negative net change at 16 per cent.
This stems from two per cent of landlords buying in the capital during the past three months compared to 18 per cent who sold.
The survey also found that landlords in the East Midlands are doing particularly well with relatively lower house prices helping to generate impressive average yields of 6.7 per cent. Those in the West Midlands are achieving typical yields of 6.2 per cent.
Demand for rental properties in the Midlands remains high amid strong economic growth in the area, according to Pargagon.
It says a thriving higher education sector and the regeneration of Birmingham, which has brought in big financial firms such as Deutsche Bank and HSBC, have boosted the area.
Paragon declined to provide its exact methodology, but a basic rental yield calculation involves taking the annual rent collected and dividing this by the value of the property, before multiplying this number by 100.
It means properties with lower values can produce higher rents, and the average value of a property in the East Midlands is £217,847, compared to £309,538 for Britain, according to property website Zoopla.
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John Heron, of Paragon Bank, said: ‘These findings highlight a big regional difference in landlord experience and buying habits.
‘Some central London landlords appear to be scaling back a little while landlords in the Midlands continue to invest on the back of a positive outlook.’
It comes after it was revealed that the number of buy-to-let mortgages taken out by landlords buying a new rental property had dropped by 40 per cent since 2015.
The decline goes hand-in-hand with tax and regulatory changes for landlords that include the reduction of tax relief on mortgage interest.
The three-year decline figures are from UK Finance, which claimed that the full impact has yet to be felt and will continue to bear down on borrowing activity in the buy-to-let purchase market.
Further pressure could be put on landlords amid a consultation on long-term tenancies, which could see three-year deals as standard.
The lack of flexibility could unnerve some property investors and prompt them to also leave the industry.
It follows similar measures already introduced in Scotland.
Richard Lambert, of the National Landlords Association, said: ‘The last quarter has seen the highest proportion of landlords selling properties in Scotland in any three month period since the Government first announced their tenancy reforms in 2016.
‘We warned these changes would unnerve investors in private rented homes in Scotland, and it should serve as a clear sign of what to expect if similar reforms are introduced elsewhere in the UK.’
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