Capital values and gross returns increase for buy-to-let

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by Gill Montia

Birmingham Midshires, the buy-to-let lender, has recorded a 2.8% rise in the average total gross return (exclusive of fees and mortgage interest costs) for the buy-to-let investor.

In 2007 the average increased to 16.3%, up from 13.5% in 2006; at the same time, the capital value of buy-to-let property rose across all regions of the UK.

The average price of a buy-to-let property increased 10.9% last year, to £154,795. Much of the growth occurred in the early part of the year, slowing in the fourth-quarter in response to base-rate rises.

The figure is, however, 27% lower than the average price paid for an owner occupied property (£197,039 in December 2007).

Investors in Greater London paid the highest average price for their properties, at £290,830. The average was at its lowest in the North (£100,345).

Buy-to-let investors in Northern Ireland saw the strongest capital growth, at 39.2%; followed by Greater London, 15.8%; the South West 10.7% and South East 10.5%.

Capital growth was at its lowest in the East Midlands (5.7%) and the North West (7.2%).

During 2007, average rental values increased by 13.1% to £698 per month, compared to £617 in 2006.

On a regional basis the largest increase in rental values was in Scotland (22.6%); the North (18.2%); Greater London (15.4%).

East Midlands and the South West were again at the bottom of the league at 8.9% and 9.2% respectively.

Rental yields increased over the year to 5.4% in December 2007, from 5.3% in December 2006.

Yields were highest in Scotland (6.1%) and the North (5.9%) and at their lowest in Northern Ireland (4.1%) and the South West (5%).