Landlords' portfolios are generating the highest total returns since June 2006, according to Paragon Mortgages.
Rising property values are driving the returns, as rental yields have remained stable for some time despite rents growing in response to tenant demand.
Paragon’s October Buy-to-Let Index, shows an average total return for landlords, a combination of rental income and capital gains, has reached 14.2%, up from 12.9% in March 2007.
The North of England has seen particularly healthy growth in returns as rents have increased above the rate of inflation and average property value has also grown. The typical landlord with property in the North has generated a gross return of around 21% over the past year.
The Greater London area continues to see the highest level of returns, at 25.1%, while East Anglia follows close behind with an average return of 24.5%.
Commenting on the findings, John Heron, managing director of Paragon Mortgages, says: “Buy-to-let is an important segment of the housing market in all parts of the country, and the North is a region where investors have prospered. The population is growing on the back of a buoyant local economy, there are good levels of inward investment, which creates jobs and prosperity, and the student population is expanding too.”
The research also found landlords typically borrow less than 40% the value of their portfolios, which Paragon says indicates landlords are making sure they can cope with expenses and void periods. Rent was found to be typically around 130%.
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