Rental returns in Northwest England outstrip central London

Data from the Association of Residential Letting Agents (ARLA) shows that houses in North West England are currently delivering the highest rental returns in England*.

Conversely, rental returns on houses in central London have been falling for the past six months. Returns have fallen from 4% to 3.5% over this time period, while levels in the North West have stayed relatively steady at 6% or above. Outside of England, houses in Scotland, Wales and Northern Ireland have also recorded broadly rising return values.

One reason for this difference in rental return rates could be the variation in capital values around the country. ARLA has found that the value of the average rental house in London stands at £1,251,000 compared to just £173,000 in the Midlands. Rented houses in Scotland, Wales and Northern Ireland have an average capital value of £197,000.

Rental figures for flats followed a broadly similar geographical pattern, with central London properties offering an average return of 4.1%, compared with returns of 5.2% and 5.8% in the North East and North West respectively.

The survey also showed the average void period – the time that a rental property remains vacant between tenants – remained steady at three weeks across the UK.

Ian Potter, Managing Director of ARLA, said:

“Our data clearly shows that landlords around the UK must choose their rental property wisely to ensure they receive the returns they expect. I would always recommend using an experienced ARLA agent when letting a property as they will be able to give the most up-to-date insight into the local rental market.

“It may be that rental returns in a particular area come as a surprise to those not directly involved in the local market. As void periods have stabilised, landlords may have an easier job of forecasting returns once an indicative figure has been received. However, some untenanted time should always be factored in to any landlord’s investment calculations.”

* Rental returns are 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 Q2 2013, was drawn from 507 member offices.  Together with the ARLA Survey of Residential Investment Landlords, June 2013 – conducted among 1,224 landlords – the report forms the ARLA Review and Index. The Review and Index is available at: http://www.arla.co.uk/buy-to-let/buy-to-let-review/2013/

source: www.arla.co.uk

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