Rental yields rise first time in six months

Amanda Jarvis

January 17, 2006

Quarterly rental yield figures released by Landlord Mortgages, has revealed overall rental yield figures in England have risen from 5.87% (Q3 2005) to 6.03% (Q4 2005).  This puts an end to the steady decrease in rental yields shown over the last six months. Rental yields in London also followed this positive trend showing a massive leap from 5.87% (Q3 2005) to 6.03% (Q4 2005). However Scotland, despite showing promise in the last quarter, has seen yields fall to 6.27% (Q4 2005).

Lee Grandin, managing director, Landlord Mortgages commented: “Despite dire predictions for the future of the buy-to-let industry at the start of 2005, last year saw the overall market stabilise and remain healthy.  Quarter four was a particularly good time for landlords as we saw rental yields rise in England as well as London after a mid-year dip.   London, in particular, saw a significant increase due to high house prices preventing people from getting onto the housing ladder and leading to strong demand for rental property.

“Unfortunately, Scotland bucked this positive trend showing a steady decrease in rental yields over the year.  This is due to the continuing growth in property prices in this region and rental yields should stabilise as the market slows down over the coming year.  Provided the economy remains stable and we don’t experience any sudden increases in the base rate, we firmly believe that 2006 will see a vibrant buy-to-let market across the UK with growth driven by increased consumer confidence and high demand.” 

Due to high house prices, London has consistently shown the weakest rental yields out of all the regions tracked.  This changed in 2005 as the gap between returns available in the capital and the rest of the country narrowed.  In addition, London boasted higher rental yields than England in Q2 (London: 5.99% – England: 5.97%) and Q4 (London: 6.27% – England: 6.03%).

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