Facts and Figures for London’s BTL market

Facts and Figures for London’s BTL market

9:59 AM, 23rd June 2020, About 3 years ago

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The latest research by Howsy, has looked at the facts and figures of investing in London’s buy-to-let sector. Rental yields are the main gauge of buy-to-let profitability and at 4.8%, outer London is home to the lowest average yield of all regions. Inner London doesn’t fare much better at 5%, the second-lowest average yield of all regions along with the South West.

While the higher cost of investing may dent yields, the average rent earned per month is still by far the highest in inner and outer London at £2,453 and £1,697 respectively. With the East of England, South East and South West the only other regions to see rental income tip over £1,000 a month on average.

The average landlord in inner London has an average portfolio of 7.7 properties, climbing to 7.9 properties in outer London. While this is lower than landlords in the South East, Yorkshire and the Humber, North East and North West, there is a clear winner where the value of these portfolios is concerned.

In inner London, the average buy-to-let portfolio is worth an impressive £4.5m on average, by far the highest of any region. In outer London, this drops to an average of £3.3m but remains considerably higher than any other region.

Of course, many landlords rely on a buy-to-let mortgage to finance their portfolio. The figures show that in inner London the total amount owed per landlord through buy-to-let mortgage borrowing is £1.1m, falling to £811,000 in outer London.

This equates to just 24% of the average buy-to-let portfolio value in both areas, with London landlords owing the smallest proportion of their portfolio value of all areas other than the South East.

There is another huge benefit when investing in a London buy-to-let. In the last year, just 28% of landlords in inner London saw their tenants fall into rental arrears, the lowest of all regions. In outer London, this figure also remains under 40% but was higher than the East of England, South East and South West.

However, over the last three months, this figure falls to 31% in outer London. Along with the South West, this is the lowest level of arrears of all regions other than inner London, where just 24% of landlords have experienced arrears.

Founder and CEO of Howsy, Callum Brannan, commented:

“When investing in a buy-to-let there’s a whole host of criteria to consider above and beyond the yield available.

“Demand plays a huge part in the success or failure of your investment and so other criteria such as void periods should be carefully considered. It’s all well and good securing a higher yield, but if your property remains empty for a larger proportion of the year this will dent your profitability.

“Tenants can also have an impact while in situ and a tenant that isn’t paying can be tricky and expensive to get rid of while reducing your profit margins at the same time.

“While this is a problem throughout the market, London offers the best chance of a better quality tenant and all things considered, the capital is one of the best segments of the buy-to-let market.”

Average yield, house price and rent
Location Average rental yield Average house price (Q1 2020) Average rent earned per month
North West 6.30% £165,714 £870
East Midlands 5.70% £194,933 £926
Yorkshire and the Humber 5.50% £163,093 £748
East of England 5.20% £291,021 £1,261
North East 5.20% £127,704 £553
South East 5.20% £322,863 £1,399
West Midlands 5.10% £187,758 £798
London – Inner 5.00% £588,698 £2,453
South West 5.00% £259,891 £1,083
London – Outer 4.80% £424,172 £1,697
Average portfolio size and value
Location Properties in the average portfolio Average house price (Q1 2020) Average value of portfolio
London – Inner 7.7 £588,698 £4,532,971
London – Outer 7.9 £424,172 £3,350,957
South East 8.1 £322,863 £2,615,189
East of England 6.4 £291,021 £1,862,533
Yorkshire and the Humber 11.0 £163,093 £1,794,021
South West 6.5 £259,891 £1,689,293
North East 13.1 £127,704 £1,672,919
North West 8.8 £165,714 £1,458,284
East Midlands 7.4 £194,933 £1,442,506
West Midlands 7.6 £187,758 £1,426,964
Average number of buy-to-let loans held, total amount owed and percentage of owed amount of total portfolio
Location Average number of BTL loans held Total amount owed through BTL mortgage borrowing
North East 8.3 £720,000 43%
North West 8.4 £559,000 38%
West Midlands 5.2 £523,000 37%
East Midlands 5.0 £515,000 36%
Yorkshire and the Humber 7.7 £581,000 32%
East of England 4.7 £533,000 29%
South West 5.2 £438,000 26%
London – Inner 5.9 £1,100,000 24%
London – Outer 5.1 £811,000 24%
South East 5.3 £583,000 22%
Rental arrears and void periods
Location Arrears last year Arrears 3 months
Yorkshire and the Humber 42% 55%
North West 50% 46%
North East 60% 45%
East Midlands 41% 43%
West Midlands 42% 39%
East of England 37% 36%
South East 36% 33%
London – Outer 39% 31%
South West 32% 31%
London – Inner 28% 24%

Data sourced from the Landlords Panel and the Gov.uk

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