The private buy-to-let sector is continuing to perform well with more single-person households, higher student numbers and increased immigration pushing up demand, n ew figures revealed yesterday.
Rising investment property value and stable or increasing rents have seen landlords gain higher returns on their investment, up from 11.89 per cent in January to an average of 16.51 per cent in June, according to Paragon Mortgages' latest Buy-to-Let Index.
Buy-to-let homes produced an average rental yield of 6.04 per cent in June, up on 6.03 per cent from the year before.
Landlords with property in regions with lower house prices saw the highest yields, with the South-west top. It enjoyed a yield of 6.48 per cent, with the average property costing £173,497.
Yields in Wales were at 6.47 per cent with house prices averaging £136,040.
But the pricier South-east yielded 5.83 per cent, with the average home costing £188,801, while Greater London produced 5.76 per cent on average prices of £338,934.
Average rent increased £351 - or 3.48 per cent - in the last three months with the typical gross annual rental income standing at £10,433 in June, up £240 from May.
Buy-to-let house prices rose by 2.27 per cent in June and 7.29 per cent over the quarter to £172,772.
Paragon said demand for housing will continue to rise with the population growing by 0.3 per cent each year, largely due to immigration.
The Department for Communities and Local Government forecasts 209,000 households need to be formed annually, with immigrants accounting for a third of new households and most of the rental market.
Only 20 per cent of migrants become homeowners within three years of arriving.
John Heron, Paragon Mortgages managing director, said: "Trends in buy-to-let are very positive. We are seeing robust activity from major landlords and the retail investor, who will often purchase to augment long-term investment portfolios or to supplement a pension. Long-term trends in household formation and inward migration point to a steady growth in the private rented sector and investors are responding by increasing their involvement."