Property Prices
Looking back at the North for buy to let properties
Thanks to rising property values and higher rents, In 2004/05 landlords in North and North-west England and in Wales did enjoy returns which far exceed those available elsewhere in the country. In the North, landlords spent an average of £95,000 on an investment property, and in the North-west, nearly £132,000. But in 2004/05, they enjoyed returns of 25%-plus, while landlords in the South-east/Greater London saw minimal returns of barely 0-3%.
In the North, an investor who spent £76,000 on a property in November 2004 would have enjoyed an annual increase in value of more than £18,000 to November 2005, plus rental income of £5,300.
That's an astonishing gross return of nearly £24,000 - 31% of their initial outlay - since November 2004.
In the North-west, landlords who spent £112,000 in November 1994 enjoyed a rise in the value of the property of £19,300, plus nearly £8,000 in rent - a total return of 24%.
By comparison, a landlord in the South-east who spent an average £171,600 in November 2004 has seen the property drop £9,500 in value while collecting annual rent of £11,000. That's a tiny profit of £1,500, virtually no return at all on a substantial outlay.
The figures suggest that landlords in parts of Southern England have been providing more flats almost as a social service in the last 12-18 months because their profits are virtually non-existent. But many landlords buy with a view to owning for at least a decade, and they will hope to make decent profits later when the upward thrust in house prices is resumed.
Figures show a distinct North-South divide. Total returns, property values and yields are mostly higher in northern regions, most notably the North, while southern regions continue to see a modest decline in property Values and yields.
Landlords in the North are still seeing total returns of over 30%, compared to a much lower national average of just 7.6%. The immediate future for buy-to- let hinges on interest rate movements during the year. We are currently seeing a vibrant market, driven by high levels of consumer demand as well as the opportunity for landlords to borrow money relatively cheaply.
However, if this changes and interest rates rise, this could put the market into reverse and see many people choosing to invest in other asset classes.
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