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Landlords pick up property in the Midlands as London market cools

  • Midlands landlords most likely to be growing their portfolio
  • East Midlands landlords achieve 6.7% average rental yield
  • One in six landlords operating in Central London report downward pressure on rents

Landlords are still picking up property in the East and West Midlands despite a significant drop in purchase activity in Central London and more modest reductions across the rest of the country, according to a recent survey of over 680 landlords carried out by BDRC on behalf of Paragon.

Figures from UK Finance show that buy-to-let mortgages for property purchase have fallen by around 40% overall since 2015 following the announcement of tax and regulatory changes for the sector.

Landlords in the Midlands however seem to be bucking the trend, boosted by strong economic growth in the region, a thriving higher education sector and continued, successful regeneration of Britain’s second city, Birmingham.

Relocation of head office and operational functions outside of London to Birmingham by some of the UK’s biggest financial services firms, including HSBC and Deutsche Bank, together with heightened activity ahead of the Birmingham 2022 Commonwealth Games, have provided an added boost.

More than four out of ten landlords in the East Midlands (42%) and one third of landlords in the West Midlands (33%) said tenant demand was increasing, compared with just under a quarter of all landlords (24%) who indicated rising demand.

Rental yields for landlords operating in the Midlands were also strong, with landlords in the East Midlands reporting average yields of 6.7% and those in the West Midlands achieving yields of 6.2%. Rental yield measures annual rent as a proportion of a property’s value and provides a valuable way to compare the return on different properties as well as different asset classes.

Landlords operating in Central London were least likely to be buying property, with a net 16% saying they had sold some property in the last quarter.

John Heron, Managing Director of Mortgages at Paragon said:

These findings highlight a big regional difference in landlord experience and buying habits. Some Central London landlords appear to be scaling back a little while landlords in the Midlands continue to invest on the back of a positive outlook.

21 August 2018

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551