Rents rise 17%

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by Gill Montia

Research by Paragon, the buy-to-let mortgage specialist, shows UK rents rising by 6% in the fourth-quarter of 2007, giving an annual growth rate of 17%.

The lender estimates that British landlords received an average of £34,500 in rental income during 2007.

According to a survey by Bradford & Bingley, another leading buy-to-let mortgage provider, yields increased to 6.02% in the East Midlands and 6.01% in Scotland in the past year.

The average UK rental yield (what a landlord can expect to receive in rent, expressed as a percentage of the purchase price of the property) stands at 5.72% of property value.

In 2007, yields were at their highest in the South-west, Yorkshire and the North-west, where they were worth just under 7% of property value.

Approximately two-third of landlords in the Bradford & Bingley survey expect rental yields to remain steady this year and one-third anticipate a rise.

Eighty-six per cent of respondents plan to increase their portfolios or make no changes in 2008.

Jeremy Law at Bradford & Bingley comments: “The social and demographic trends that have been driving the market are strong, with rental demand remaining robust.”

According to Mr Law the likelihood that the housing market will stagnate in the coming year should strengthen demand for rental properties “leading to improved rental yields”.