The Midlands is proving to be a good bet for landlords in England’s private rented sector and they are more likely to be growing their business in the region than in London, new research has found.
East Midlands landlords achieve 6.7% average rental yields while one in six landlords operating in central London report downward pressure on rents, according to the survey carried out by BDRC on behalf of lender Paragon.
Landlords are still picking up property in the East and West Midlands despite a significant drop in purchase activity in central London and more modest reductions across the rest of the country, it shows.
It points out that figures from UK Finance show that buy to let mortgages for property purchase have fallen by around 40% overall since 2015 following the announcement of tax and regulatory changes for the sector.
Landlords in the Midlands, however, seem to be bucking the trend, boosted by strong economic growth in the region, a thriving higher education sector and continued, successful regeneration of Britain’s second city, Birmingham.
It also points out that the relocation of head office and operational functions outside of London to Birmingham by some of the UK’s biggest financial services firms, including HSBC and Deutsche Bank, together with heightened activity ahead of the Birmingham 2022 Commonwealth Games, have provided an added boost.
Indeed, some 42% of landlords in the East Midlands and 33% in the West Midlands said tenant demand was increasing, compared with 24% of all landlords who indicated rising demand.
Rental yields for landlords operating in the Midlands were also strong, with landlords in the East Midlands reporting average yields of 6.7% and those in the West Midlands achieving yields of 6.2%.
Rental yield measures annual rent as a proportion of a property’s value and provides a valuable way to compare the return on different properties as well as different asset classes.
Landlords operating in Central London were least likely to be buying property, with a net 16% saying they had sold some property in the last quarter.
‘These findings highlight a big regional difference in landlord experience and buying habits. Some central London landlords appear to be scaling back a little while landlords in the Midlands continue to invest on the back of a positive outlook,’ said John Heron, managing director of Mortgages at Paragon.
