Buy to Let Market Performance 2012

publication date: Feb 18, 2013
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Buy to Let Market Performance 2012

Many media headlines and organisations in 2012 were still claiming huge rises in rents. However, it’s clear when talking to the majority of landlords and tenants that rents aren’t really rising at all in the private sector. The majority of tenants are being looked after by their landlord, who is choosing to leave rents the same if they have a good tenant who pays on-time and looks after the property well.

Capital growth too isn’t really helping landlords much at the moment, as prices have fluctuated slightly through 2012, but in the main are pretty stagnant bar a few ‘busy’ areas in Central London.

However, for those landlords who are managing to ‘find a property bargain’ though and with rents holding, average yields are going up slightly. The chart below records ARLA showing average yields rising from 4.9% (Q4 2011) to 5.2% in Q4 2012 although this looked like a relative blip and in reality, average yields from 2011 through to 2012, according to ARLA, remain at their long term average of 5.2%.

There is a slight improvement in total returns (income + capital) driven mostly by capital growth average between 9% or 22% depending on whether the property is owned outright or mortgaged.

Chart comparing latest buy to let returns versus 2004, 2011 and 2012

Chart comparing latest buy to let returns versus 2004, 2011 and 2012

*Combined returns include capital growth and income. 
  The lower figures are for properties bought with cash, the higher returns are for mortgaged properties 

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