Falling property prices push up buy to let profits

New figures suggest that “the owner-occupier market is sinking deeper into the mire".

Gross yields on buy to let property in the last three months has risen on all property types apart from semi-commercial, according to the latest figures from Mortgages for Business who say the driving factors behind the increase were a combination of falling property prices and high tenant demand.

Yields on what is called "vanilla buy to let" - buying houses and flats - increased from 6.1 per cent to 6.7 per cent over the past three months, with the average loan to value ratio also going up from 64 per cent to 68 cent.s.

Houses in Multiple Occupation (HMOs) saw yields jump from 9.2 per cent in the second quarter of the year to just over 11 per cent in the third.

“The owner-occupier market is sinking deeper into the mire," said David Whittaker, managing director of Mortgages for Business, "and is dragging property prices down with it. It’s great news for buy to let investors, who are able to snap up cheaper property, usually at a higher loan to value ratio because lenders are understandably willing to advance more when property prices are lower. It’s a fairly simple equation: suppressed property prices, plus strong demand for rented accommodation, equals higher yields for landlords. 

"Investors are being canny and targeting areas where house prices are particularly squeezed. Anywhere outside the south-east is a particularly rich seam at the moment."

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