"When breaking the market down at a more granular level, there are a multitude of areas that have seen minimal movement in house prices yet where rental values have performed very strongly indeed"
- John Ennis - Lomond
Lomond analysed Gov data on both rental prices and house prices and how both have changed over the last year and what this means for the average yield available to buy to let investors.
The research shows that over the last year, the average monthly rent across England and Wales has increased by 8.2%, far outperforming the 2.2% growth seen in house prices. As a result, the average rental yield has climbed from 4% to 4.2% in the space of just 12 months.
Every region of England and Wales has seen positive growth as a result of rental growth far exceeding the rate of house price growth seen, with London (+0.4%), the South East (+0.3%) and North West (0.3%) seeing the largest change in the average rental yield, whilst the North East is home to the strongest overall yield at 4.9%.
However, further analysis by Lomond shows that, at the local authority level, there are no less than 129 areas of England and Wales where rental prices have grown whilst house prices have softened or not moved. In this case, rental yield growth has been strengthened over and above the norm and represents excellent investment hotspots.
Here are the areas to have seen the largest growth of 0.4% or more in rental yield across each region:
East Midlands: Nottingham (+0.6%), Ashfield (+0.5%), Broxtowe (+0.4%) Derby (+0.4%) and Erewash (+0.4%).
East of England: Ipswich (+0.8%), Hertsmere (+0.7%), Watford (+0.7%), Harlow (+0.6%) and Stevenage (+0.6%).
London: Brent (+1.3%), Hammersmith and Fulham (+1.2%), Westminster (+1.2%), Tower Hamlets (+0.9%) and Haringey (+0.7%).
North East: Hartlepool (+0.6%).
North West: Salford (+0.8%), Burnley (+0.7%), Knowsley (+0.5%), Blackburn with Darwen (+0.5%) and Bury (+0.4%).
South East: Reading (+0.8%), Folkestone and Hythe (+0.8%), Portsmouth (+0.7%), Espwom and Ewell (+0.7%) and Thanet (+0.6%).
South West: Exeter (+0.4%), Swindon (+0.4%),
Wales: Merthyr Tydfil (+1.4%), Denbighshire (+0.5%), Cardiff (+0.5%), Gwynedd (+0.4%) and Neath Port Talbot (+0.4%).
West Midlands: Birmingham (+0.4%), Solihull (+0.5%)
Yorkshire and the Humber: York (+0.5%)
Lomond Chief Revenue Officer, John Ennis, commented: “Generally speaking, the property market has held its own over the last year with house prices standing strong despite the turbulence caused by higher mortgage rates. Now we have seen the Bank of England reduce rates we are certainly see significant optimism coming back in from both buyers and sellers.
"When breaking the market down at a more granular level, there are a multitude of areas that have seen minimal movement in house prices yet where rental values have performed very strongly indeed.
"This increased level of housing market affordability coupled with a strong rental market performance has helped to significantly improve the yields available to buy-to-let investors and created opportunities in markets that they may not have previously considered.
"This demonstrates the importance of strategic investment for landlords when looking to create or expand their portfolio.”
