Gross rental yields on rental properties across England and Wales were at five per cent in September, according to the latest Buy to Let Index from Your Move and Reeds Rains
This means gross yields are the same as they were in August, but on an annual basis they are down by 0.4 percentage points from 5.4 per cent a year ago.
Total annual returns on a typical rental property were 13.4 per cent during the 12 months to September, once price growth and void periods were taken into account.
This is up from 7.9 per cent in the year until September 2013, and also marks an increase from August this year when annual returns were 13.3 per cent.
Total gross returns of such a level mark a new all-time record – beating the peak seen in August 2014 and the last peak of 12.9 per cent noted in April 2010.
In absolute terms, it represents a return of £22,706 for the past 12 months – although this is before deductions such as mortgage payments and maintenance are considered.
Of this figure, £8,379 is rental income and £14,327 is average capital gains, while if rental property prices continue to rise at the same pace as the last three months, landlords could expect a return of 22.1 per cent across the next year – equivalent to £40,489 per property.
“Landlords have many costs to consider, which always makes the reality of profits rather different from gross headline figures,” said David Newnes, director of Your Move and Reeds Rains.
“But a record for gross returns is encouraging news for landlords’ finances and the prospects for further investment in new homes to let.”
Tenant finances improved in September with 7.2 per cent of all rent in arrears, down from eight per cent in August this year and 8.5 per cent a year ago.
This represents a drop of £24 million in absolute terms since August and a fall of £38 million compared to September 2013 – leaving late rent to total £256 million in September 2014.
“Tenants are benefitting from dramatically recovering employment prospects, and from a healthy and growing rental market,” added Mr Newnes.
He added that the proportion of late rent has now more than halved since it hit peak levels of nearly 15 per cent in 2010.