Falling House Prices Drive Up Buy To Let Yields

Oct. 16, 2012 - PRLog -- Bournecoast Property Agents say that due to the report out on Friday, this is due to a combination of falling property prices and high tenant demand and the Country is in now in the grip of a Buy to Let boom with landlords taking advantage of low property prices.

In May of last year Bournecoast predicted the ever increasing demand for Buy to Let (BTL) properties.

Gross yields rose on all types of buy-to-let property in the third quarter, apart from semi-commercial – for example, flats over shops. Yields on Houses in Multiple Occupation (HMOs) jumped from 9.2% to 11.1%.

Simon Tebbutt, Business Development Manager at Bournecoast said: “The owner-occupier market is sinking deeper into the mire and is bringing property prices down with it.

“However, this is great news for buy-to-let investors, who are able to snap up cheaper properties, usually at a higher Loan to Value “LTV” because lenders are understandably willing to advance more when property prices are lower.

“It’s a fairly simple equation: suppressed property prices, plus strong demand for rented accommodation, equals higher yields for landlords.  

In the report David Whittaker, managing director of Mortgages for Business, said “Investors are being canny and targeting areas where house prices are particularly squeezed. Anywhere outside the South-East is a particularly rich seam at the moment.”

According to the index, yields on ‘vanilla’ buy-to-let increased from 6.1% to 6.7% over the quarter, thanks largely to the average property value of vanilla investments falling by 3% between Q2 and Q3 to £210,197.

This helped push up the average LTV from 64% to 68%, with lenders more willing to grant higher LTV deals thanks to lower property prices.

Similarly, the jump in yields for HMOs was triggered by a sharp increase in refinancing of cheaper property. The average property value in HMO deals fell 41% compared to last quarter as more investors refinanced on properties under £200,000, with the launch of Keystone buy-to-let range offering investors a wider range of financing options on cheaper property.

Yields on Multi-Unit Freehold Block property rose for similar reasons. Gross yields increased from 7.5% to 8.8% between Q3 and Q4 as average property values in deals in this sector decreased by 33% from £442,223 to £297,938.

Bucking the market trends was semi-commercial property, where gross yields fell from 7.4% to 7.1% between Q2 and Q3, despite the average property value falling by 26% from £1,054,913 to £779,761. Average loan sizes remained relatively flat, with lenders like RBS Group asking investors to refinance elsewhere as they look to reduce their exposure to this type of property.

The number of lenders operating in buy-to-let remained at 25, while the number of products increased slightly to 465 from 456 in Q2.

Simon added: “Bournecoast are the area’s property investment solutions provider of choice. We offer an unrivalled service which is reflected in the increasing demand from our customers for lettings, which – as we correctly predicted - continues to grow."

With the clear understanding in the local market possessed by Bournecoast, and with the unequalled experience of being established and still family run for over 50 years, the company prides itself in providing quality properties and recognising a good investment potential by being able to offer holiday lets on suitable properties to generate even more income.  
For information on currently available investment opportunities and to find out more about what makes a good investment, contact the friendly team at Bournecoast on 01202 437888 or visit www.bournecoast.co.uk.

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Background:
In 2010 Bournecoast celebrated it’s 50th anniversary and has been family run since it’s inception when it was established by Major & June Webb in 1960.  Keith Simmons MBE, the previous managing director and Major Webb’s son-in-law, was then joined by his son and daughters, Des Simmons, Veronica Strongman and Anita Smith, who now run the company with a team of seventeen staff.

Bournecoast Property Agents have extended their skill base within the ever changing property market.  

Over the past 50 years Bournecoast has invested in a skilled – and award winning - workforce, ensuring each member of the team enjoys dealing with people and property whilst ensuring their knowledge of the whole property market is second to none, providing advantage over most local agents.


Issued by:
Alex Eaton
Marketing
Bournecoast
alex@bournecoast.co.uk
01202 437888