Rental yields and the north/south divide
19th April 2012
Investing in buy-to-let property is a significant step for the vast majority of Britons irrespective of the strength of their financial security and background.
Accumulating the necessary funding, choosing the areas which may offer the best yields and finding the ideal freehold insurance policies for any houses in multiple occupation are just a small range of a vast number of factors that aspiring landlords have to consider.
Yet with figures recently released by Paragon Mortgages revealing a north/south divide when it comes to regional variation in the profitability of rental properties, some may now find themselves drawn to northern cities that currently offer the best yields in the country.
By referring to the statistics that show the north-west and north-east provided landlords with the highest profit margins in Britain during the first quarter of 2012, many could develop their property portfolios accordingly to take full advantage of the lucrative nature of the northern lettings market.
While Scotland and the east and west Midlands provided investors with the lowest rates of return - all with rates of 5.5 per cent - the north-west boasted yields of 6.6 per cent.
With the seemingly clear potential for maximum profit existing outside of the southern and midland cities - indeed, London's returns were relatively modest at 5.9 per cent - increasing numbers may switch their attention to new areas.
The north/south economic divide has been debated for decades, and the latest news serves as a victory for the north when it comes to attracting prospective investors.
John Heron, director of Paragon Mortgages, said: "The rental yield figure is important for landlords as it gives a good indication of how well a property, and in a wider sense, a portfolio is performing."
As landlords respond to the demands and trends in the lettings market, a shift in investment towards the northern regions could well take place in the coming months.
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