HMOs produced average rental yields of 8.9% last year, the highest of all buy-to-let property types according to the latest Complex Buy to Let Index.
Although yields for HMOs have dropped below 9% for the first time since this index was launched in 2011. Not far behind HMOs were multi-units such as blocks of flats, which generated yields of 8.1% in 2017. Again, this has slightly decreased from 8.3% on the year before.
Properties such as houses and flats by comparison produced lower but more consistent yields, averaging at 5.7% last year.
In 2017 the average value of a regular buy-to-let property was £305,283 decreasing 19% in value from 2016’s figure of £375,409. The results indicate that landlords are favouring lower value properties and Mortgage for Business in particular believes they have been looking North, where property prices are cheaper and higher rental yields are achieved.
“Savvy landlords like to have a good mix of properties,” said Jeni Browne, sales director at Mortgage for Business. “They like the consistency of vanilla BTLs and the higher returns of more complex property types. Although lower than previously, 8.9% is still an excellent return for HMOs, not only when compared to vanilla buy to lets but also other, non-property assets.”
The number of buy-to-let mortgage products available has increased despite no variation in the number of lenders operating in the market in Q4 of 2017. There has been a 444% rise in the number of buy-to-let mortgage products on the market since the index began seven years ago.
The considerate rise can be attributed to lenders responding to the growing popularity of buy-to-let as an investment avenue and offering a seemingly endless range of products to suit all borrowing requirements and all types of properties.
In fact a new study conducted by Commercial Trust Limited found that two age demographics, those aged 20-29 years old and those aged 30-39 years old, have been the only ones to record continued year-on-year market share growth for buy-to-let purchase applications.
“The figures suggest that younger people can see the value in investing in bricks and mortar – and perhaps this is an indicator that they perceive property investment as a sounder investment than pensions in the longer term,” commented Andrew Turner, chief executive at Commercial Trust Limited.
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