Capital appreciation boost for landlords

Two lettings surveys show that landlords are now enjoying significant rises in the value of their assets - even if rental income is relatively static.

Data from Countrywide shows rising house values over the past year has driven up total returns for landlords to an average of 12.2 per cent but with rental income accounting for only half of that return - well down on last year when rent accounted for 90 per cent.

Prior to May 2013, house price growth then running at less than the rate of inflation meant that around 90 per cent of the average landlord's return came from rent and the remaining 10 per cent from capital appreciation of the property - for some landlords with properties in areas particularly badly hit, the capital appreciation was negative.

However, the Countrywide data shows significant regional variations. In London, where yields are lowest and house prices are rising most quickly, rent has comprised just 25 per cent of the landlords return over the past 12 months. The other 75 per cent comes, unsurprisingly, from the increasing value of property.

The knock-on effect of rising house prices has been a contraction in yields, which have fallen from an average of 6.3 per cent to 6.1 per cent over the past year. However, for landlords, particularly across the southern half of the country, the increase in value of their property has more than offset the effects of any yield erosion.

Meanwhile there are signs that central London rents are falling according to Chestertons - the London arm of Chesterton Humberts, which is part way through a long-running process of separating its rural property division (to be known only as Humberts) from its offices in the capital (now called Chestertons).

It says that prime London rental values dropped one per cent in the year to April, although some locations dropped more - notably Camden, down -6.6 per cent.

The average weekly PCL rent stood at £907 at the end of March. The highest average PCL sub-market' was in St John's Wood (£1,872 per week), Knightsbridge/Belgravia (£1,806) and Mayfair (£1,677).