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News: Buy-to-Let - New found confidence?

September's Buy-to-Let Index from Paragon Mortgages shows property prices paid by investor landlords easing slightly on last month's level, but still almost £8,400, or 5.5%, higher than 4 months ago (April 05). This period of relatively strong increases in landlord property prices is in marked contrast with the months between November 2004 and April 2005, when property values were static or declined slightly. In August, landlords paid on average £160,984 for a typical investment property, compared with £152,622 in April this year and £141,765 in August 2004 - up 13.7% over the year.

Last month saw a significant change in the regional pecking order in terms of average yield. Wales, at 7.37%, usurped Yorkshire in top spot in terms of highest yield. Yorkshire, which had been at or near the top of the list for most of 2005 slipped into fourth place, at just under 7%. The West Midlands remained in second position, with a yield of 7.31%.

In terms of total returns (i.e. taking into account both capital appreciation plus average rental return on a property bought 12 months ago), northern regions of the country remained the star performers - the North in first position at 40.2%, Yorkshire second at 39.9%, and the North West 37.1%. This was mainly attributable to the above average level of property price inflation over the past 12 months. Nationally, the average total annual return stood at 20.3%, compared with 22.3% in July.

John Heron, managing director, of Paragon notes that the market took a breather in the winter and early spring 2004-5, which translated into flat property prices paid by landlords. More recently, there's been growing evidence that landlords are willing to engage in transactions and that is having the effect of moving prices of investment properties purchased gently upwards.

Meanwhile, the general trend in rents has been resoundingly upwards over the past 12 months. Indeed, since August last year, rents are up by almost £1,000 or 10.5%, more than three times the rate of inflation, says Heron.

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