PERSONAL FINANCE: Increasing Yields, Rents and Property Values

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Byline: By John Cranage Personal Finance Editor

New figures from Paragon Mortgages' buy-to-let index show that the investment property market is continuing its upward trend.

February saw increases in key indicators with yields, property values and rents all rising.

Investors have seen rents rise by 6.39 per cent from pounds 9,954 in November to pounds 10,590 in February.

Property values also increased over the month (up by 0.50 per cent) and the average property price now paid by landlords stands at pounds 163,417.

Over the quarter, values have increased by 5.72 per cent, up pounds 8,849 from November's figure of pounds 154,568, while yields in England and Wales currently stand at 6.48 per cent compared with February's figure of 6.45 per cent.

John Heron, managing director of Solihull-based Paragon, said: "Increasing yields, rents and property values are only part of the positive story surrounding the buy-to-let market.

"The beginning of 2005 was relatively slow, but activity picked up in the second half of last year and 2006 has seen momentum gather and investor confidence grow.

"At Paragon we are seeing application flows significantly ahead of last year, with completions some 60 per cent higher than a year ago, and data from the Council of Mortgage Lenders shows that gross buy-to-let mortgage lending in H2 2005 reached a record high, of pounds 14.6 billion, 47 per cent higher than in the previous six months."

Tenant demand has been a key factor contributing to rising rental income, which in turn served to increase yields.

The Royal Institute of Chartered Surveyors (RICS) reported recently that tenant demand had increased by 24 per cent, the largest increase in the last 4 1/2 years. …