Average rental income rose 2.79% in July, according to the latest Buy-to-Let Index from Paragon Mortgages.
The specialist lender’s monthly survey reported that the average rental income rose to £9,133 from £8,930 in June, the largest increase in 10 months and 5.18% higher than the same time last year.
However, rental yields dipped as the average value of properties purchased for buy to let increased from £111,712 to £117,902.
John Heron, managing director of Paragon, said: ‘With market activity picking up, bargain house prices have been more difficult to achieve and this is reflected by the very high house price rise of 5.54% recorded this month. This has had a negative impact on yields ‘ which have slipped from 7.95% to 7.75%.’
The Index found the best returns were seen from terraced and semi-detached properties, which offer yields of 9.13% and 8.24% on average.
It found that the North is the only region where landlords are still seeing double digit yields (10.45%), although in terms of overall return the Midlands have proved the best place to invest over the last year, with returns of 56.51% in the East and 64.64% in the West.
These findings were confirmed by the Association of Residential Letting Agents (ARLA) which has published its own buy-to-let survey and found the average net percentage return is between 6% and 8%.
ARLA’s survey examined the profile of typical landlords and found that 68.6% have purchased a property for the purpose of buy to let since 2002, and seven out of 10 expect to make further acquisitions in the next 12 months. It also discovered that in 1996 the typical investor was in their 50s, but now more than a quarter of respondents are aged between 25 and 35, whereas less than a quarter are aged between 46 and 55.
Almost two out of 10 respondents said they never review their mortgage, and three out of 10 said they looked to remortgage irregularly, however 28% claimed to review their portfolio annually.