Rental Returns in Northern England Outstrip South

Tuesday, October 02, 2012

Rental returns in the North East and North West have been rising steadily since the end of 2011. Last month (August) they hit 5.7 per cent and 6 per cent respectively, making the North West the region with highest rental return in the UK.

However, the average capital value of rented houses remains highest in London and the South East, and lowest the North East and the Midlands. In Central London the average value of a rented house stands at £1,251,000 compared to £175,000 in the North East and £172,000 in the Midlands.

Ian Potter, Managing Director of ARLA said:"Our data shows that the North West is presently showing the highest return on rental investment. But these figures show the Private Rented Sector is experiencing the same regional variations as the sales market, and therefore investors should move with caution.

"Properties in Central London are outperforming the South East region as a whole in terms of the capital asset value of buy-to-let properties. Indeed the South East region, excluding Central London, saw a sharp fall in the values of buy to let flats of 2.2 per cent over the quarter, showing that recovery in property prices following the recession is still limited to the capital's most in-demand postcodes."

The latest ARLA survey also shows that over the past two quarters combined, nearly half (47.5%) of ARLA members reported an increase in the level of achievable rents across all types of property, reversing previous declines in achievable rents reported by letting agents.

Ian Potter said:"Overall the level of achievable rents has risen a little this quarter, reversing the previous downward trend which began last August."

ARLA agents reported a steady rise in the number of landlords increasing their investment in the PRS (from 21% to 22%) and they also reported a sharp reduction in the number of landlords who are actively reducing their investment levels (down from 17% to 12%).

* Rental returnsare the income generated from capital investment made by landlords in buy-to-let property.

The data from the ARLA Members' Survey of the Private Rented Sector, covering Q3 2012, was drawn from 525 member offices. Together with the ARLA Survey of Residential Investment Landlords, August 2012 - conducted among 1168 landlords - the report forms the ARLA Review and Index. All surveys and statistics can be downloaded from http://www.arla.co.uk/ 

Table:Average Rental Returns on Houses