Wednesday, Jun 20, 2007
Average 3.6% yields............
landlord expert: Latest report on the buy-to-let market
......should we be surprised, especially when one of the report's most prominent conclusions is that average letting portfolios are "worth 498,000 pounds and the average gross rental income stands at 18,000 pounds"?
Any would-be landlords can see that those figures simply do not stack up. They show that the ratio of gross income to property valuation is just 3.6pc...........
Posted by kagiso @ 07:45 AM (194 views) Add Comment
4 Comments
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1. Planning4acrash said...
Who will invest in property now when you can get over 5% yield on stable government bonds, with prospect of rising yields in the future and un-priced risk in the housing market? A standard bank account provides a greater yield at present, with no capital gains tax to talk of.
2. Planning4acrash said...
"chopping 100,000 pounds off our average property valuation would make acquisition a slightly more attractive proposition, but not by much". This suggests that more than a 25% crash would be required to unwind the market, if they are right that the average portfolio is about 400k, that's great news! A fall like that would bring down the average price of a house to below 150k, below 5x the average household income of just over 30k. I suspect that further falls are likely, given that 5x salary is unrealistic in a higher interest rate environment. I suggest 130-40k average house prices from a 1-2yr crash followed by a slow, longer correction towards 100-120k before the market picks up again in about 7yrs. 100k is about 3.5x the average household salary and this is what should be expected if interest rates go back to historic levels. I wouldn't rule out an overcorrection to 90k. Note that house prices bottomed out to just over 70k as recently as 1996.
3. Benedict said...
Presumably there's some degree of time lag though . . . rental income is the average of actual income, hence including all the landlords who've got sitting tenants they like and rely on who haven't put rents up in line with prices, but portfolio value is current market value. If every landlord turfed out their tenants and let afresh at a market rent the average income would probably be more than 18k.
Probably still quite low, but not as low.
4. Landlord Expert said...
I think analysis on such issues a waste of time and very often just someones opinion as opposed to any bottom line figure.
House price growth is a far more rewarding investment than government bonds. Rental yields in conjunction with house prices rising is still the best investment in the country without question.