Complex buy to let yields also increased on semi-commercial property, with the average yield rising from 7.3% in Q1 to 7.4% in Q2. Houses in Multiple Occupation continued to offer investors the highest returns, despite yields falling from 10.7% in Q1 to 9.2% in Q2.
The consistently high yields on complex buy to let property contrasted with vanilla buy to let, where yields dropped slightly from 6.3% in Q1 to 6.1% in Q2.
The declining yields on vanilla buy to let property came despite the average loan sizes and property values increasing in this subsector in Q2. The average loan size on vanilla increased 13% from Q1 to £138,557, while the average value of vanilla property bought by investors rose sharply from £191,470 in Q1 to £217,374 in Q2.
Buy to let mortgage availability increased in Q2. There was an average of 456 of buy to let products offered over the quarter. It represented an increase of 3% from an average of 442 products available in Q1, and of 13% from Q2 last year.
David Whittaker, managing director of Mortgages for Business, commented:
“Although the recipe for economic growth continues to elude the government, the buy to let market is performing consistently strongly and is managing to resist the economic downturn going on around it. It is the one area of the property market that is performing well. Complex buy to let yields have been consistently strong, with returns on MUFB investments proving particularly lucrative over the last quarter.
Yields in the vanilla market have reached something of a glass ceiling. At a shade over 6%, there isn’t much scope for them to increase further. It’s encouraging more investors to diversify by adding complex buy to let properties to their portfolios.
We’re also seeing vanilla investors purchasing more expensive property in the south-east as they try to tap into the big reservoir of tenant demand in the region. As a result, vanilla loan sizes and average property values have increased significantly over the last quarter.”
