West Midlands top the yields table

Landlords in the West Midlands enjoy the highest rental yields in the UK, research commissioned by buy-to-let specialist Paragon Group has revealed.

Related topics:  Specialist Lending
Millie Dyson
25th October 2011
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Paragon’s research revealed that rental property in the West Midlands generated an average yield of 7.35%.

The West Midlands region, which encompasses Birmingham, Wolverhampton, Coventry, Stoke and Worcester, is undergoing a renaissance, with the redevelopment of Birmingham city centre and a host of businesses creating jobs in the region, including Jaguar Land Rover and John Lewis.

The region has a strong manufacturing base, as well as a growing professional services sector and a number of renowned universities.

Outer London followed with an average yield of 7.32%, the South West had a yield of 7.07% and the North West generated a yield of 6.97%.

Paragon, which provides buy-to-let mortgages via the Paragon Mortgages and Mortgage Trust brands, worked with market research specialists BDRC Continental to survey nearly 600 landlords across the UK during September.  

Yields, a property’s annual rental income as a proportion of its current value, are an important factor for landlords when making a property purchase decision.

The research also revealed that students remained the highest yielding tenant type with an average yield of 7.62%. Students provide attractive yields as the property is typically let on a per room basis and benefit from parental guarantees.

At the other end of the scale, families with children and migrant workers generated yields, of 6.57% and 6.53% respectively.

Meanwhile, the research showed that Houses in Multiple Occupation (HMO) were the highest yielding property type for landlords with a yield of 7.56%.

An HMO is a property shared by three or more tenants who are not members of the same family and who share amenities, such as a hallway, kitchen or bathroom.

HMOs were followed by bungalows, providing an average yield of 6.99%, and flats where the landlord owned the entire block were third in line with a yield of 6.95%.

Nigel Terrington, Paragon Chief Executive, said:

“The yield a rental property generates is a hugely important part of a landlord’s business plan, as they give a good indication of how well the property is performing and the level of income it is providing.

“It is interesting to see that the West Midlands is generating the highest yield. The area itself is a hub for manufacturing, has a strong professional services sector, is home to several large universities and is undergoing significant redevelopment, so therefore attracts a healthy mix of tenant types, including students, young professionals, manual workers and economic migrants.

"All of which contributes to a healthy, regional private rental sector.”

Yield tables:

Location:

- West Midlands: 35%

- London (outer): 7.32%

- South West: 7.07%

- North West: 6.97%

- South East (excl London): 6.97%

- East of England: 6.71%

- East Midlands: 6.65%

- Yorkshire and Humber: 6.63%

- London (central): 6.51%

- North West: 6.28%

- Wales: 5.66%

- Scotland: 4.92%

Tenant type:

- Students: 7.62%

- Other benefit claimants: 7.14%

- Executive/ company lets: 7.01%

- Young couples: 6.90%

- Local housing allowance claimants: 6.86%

- Older couples    6.82%

- White collar/clerical/professional: 6.80%

- Blue collar/manual workers: 6.69%

- Young singles: 6.63%

- Families with children: 6.57%

- Migrant workers: 6.53%

Property type:

- HMO: 7.56%

- Bungalow: 6.99%

- Flats – a block of units: 6.95%

- Semi-detached houses: 6.92%

- Terraced houses: 6.90%

- Flats – individual units in a block: 6.47%

- Detached houses: 6.39%

- Commercial premises/shops: 3.75%
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