Small is best for rental yields, claims property firm

Small properties can achieve big rental returns, according to the latest figures from Countrywide.

One and two-bed properties see the highest average yields at 6.8% and 6.4% respectively, the survey of 50,000 properties in England, Scotland and Wales shows.

By collecting details of yield, rent and arrears based on the number of bedrooms in a property the figures reveal to buy-to-let landlords and investors which size properties are the most profitable, explains Nick Dunning, Countrywide commercial director.

He gives an example of a one-bedroom flat in Nottingham that recently sold for £51,000 and is achieving a rental yield of 6.9%.

Rising rents, a drop in arrears and improved buy-to-let mortgages are encouraging for investors, he explains.

Three-bed properties achieve an average yield of 6.2%, and four-bed achieve 5.6%, the figures also show. Average rent for a one-bed was £673 per month in the first quarter of 2013, and for four-bed properties it was £1,398.

Smaller properties have seen bigger rent increases – 3.3% year-on-year for one and two-beds. Rent arrears have fallen for all sizes of property in the first three months of the year.

However, another recent report suggests that average rents fell in the first quarter of this year. A drop of around 0.43% was seen, according to the Move with Us Rental Index.

An initial fall just after Christmas saw rents stabilise over the end of January and early February, but a 0.25% fall was seen in March, the report states.

But this is a relatively small change and is a national picture, so some figures at the extreme ends could skew the overall picture.

The yearly trend shows that rents are stable at around £969 per month with only minor fluctuations as the supply and demand balance shifts.

Move with Us director Robin King says another slight fall could be seen in the coming months, but the long-term trend should be more stable.

He also explains regional figures showed more significant changes between January and March this year. Rents in the north grew at a slower pace than in 2012, but the south of England is in a stronger position.


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