Jump to content
House Price Crash Forum
Secret Squirrel

Average Rental Yield 6.4%

Recommended Posts

So the average rental yield in the UK is 6.4%

From a buyers point of view would you say this is an accurate guide to compare to ? it still seems quite low considering potential falls

The Price / Yield ratio seems to differ drastically from 5.5 - 9 % depending on type of properties , but the higher ratio are obv buy to let dreams (if there is such a thing) & you wouldn't choose to buy such a property as your home

How much does the average BTL aim for ? are rents still holding strongly , and do you see rents dropping with the market , or an after effect ?

How does your house compare :)

Share this post


Link to post
Share on other sites

My LL inherited from his father, like many of the let properties in the village.

It is all gravy for him.

It will be a gravy boat for his kids.

FandabbyDozy

Fanks for Dat

Does he Own the kids yet ?

Edited by Secret Squirrel

Share this post


Link to post
Share on other sites

What about yourself Mr Squirrel, or is that a secret. ;)

I live in a shared house but is valued at 150k & would rent for about £650 ( 5.4%) so the value clearly has to drop to meet any national average ;)

Edited by Secret Squirrel

Share this post


Link to post
Share on other sites

4.7% based on the price a house down the road sold for earlier this year. North London.

The BTL guys who bought recently in the sh*tty areas nearby are doing best because of LHA but even then the yields would be less than 6%.

Share this post


Link to post
Share on other sites

I rent a £350k house and pay about £11K a year in rent, so that's a yield of 3.14%.

But it's leasehold and my LL has to pay about £2.5K a year in fixed maintenance and estate fees, so in reality, it's more like 2.4%.

Share this post


Link to post
Share on other sites

How does your house compare :)

2.82%

£435 for house probably worth currently £185k. I know the land lady and it realy should be closer to 4%

Renting at 2.8% and receive 4.5% from NS&I.

Share this post


Link to post
Share on other sites

In this case the yield is infinty %

strictly speaking though you should still comapre the yield today based onj teh current market value and current market rent to compare gaianst other investments

Of course otherwise the yield on some of my shares look unbelievable. And my old man would be making 500% or more yield on some of his.

Share this post


Link to post
Share on other sites

So the average rental yield in the UK is 6.4%

From a buyers point of view would you say this is an accurate guide to compare to ? it still seems quite low considering potential falls

The Price / Yield ratio seems to differ drastically from 5.5 - 9 % depending on type of properties , but the higher ratio are obv buy to let dreams (if there is such a thing) & you wouldn't choose to buy such a property as your home

How much does the average BTL aim for ? are rents still holding strongly , and do you see rents dropping with the market , or an after effect ?

How does your house compare :)

My landlord has had this converted house valued at £250k about a week ago for MEW purposes. It earns £2k per month in rent, so that is a gross yield of 9.6%. It is a town centre town house converted into 2 x 1 bed flats and a 2 bed maisonette. Estate agents will probably call the maisonette a penthouse suite.

Rents are holding, but not strongly, the next move is more likely to be slightly down than up, so the increase in yield is coming from falling purchase prices.

Share this post


Link to post
Share on other sites

So the average rental yield in the UK is 6.4%

From a buyers point of view would you say this is an accurate guide to compare to ? it still seems quite low considering potential falls

I don't know where 6.4% comes from, back in 2008 Paragon who are London and South East heavy had those rates as an average.

Today ARLA give 4.79% for Prime Central London Gross yield. Cash purchases. 11.68% geared

If you gear up then your return is much better the higher the LTV the better and if the value of the property falls the yield also increases.

6.4% looks high to me unless it's heavily geared on a reasonably priced property.

http://www.arla.co.uk/flash/review2010q3/index.html

Share this post


Link to post
Share on other sites

6.4% was a figure i found on the net but seems about right

Many flats/houses i look at average between 6 & 8% based on current Buy/ Let ratios

I wouldn't buy a place offering any less potential

Some seem too high @ 8+ % so i guess the rents are flawed or overpriced in those instances , otherwise they're bargains right ?

Share this post


Link to post
Share on other sites

I don't know where 6.4% comes from, back in 2008 Paragon who are London and South East heavy had those rates as an average.

Today ARLA give 4.79% for Prime Central London Gross yield. Cash purchases. 11.68% geared

If you gear up then your return is much better the higher the LTV the better and if the value of the property falls the yield also increases.

6.4% looks high to me unless it's heavily geared on a reasonably priced property.

http://www.arla.co.uk/flash/review2010q3/index.html

Exactly. The OP should give a source for the 6.4% stat.

Paragon was 6.4%, but as far as I can see they’re now saying 6.1% for Q3 2010. They have always been well above FindaProperty.com who are currently saying 4.69% for the whole of the UK. They quote 5.1% for London which is more in line with the figure you cite for ARLA.

Also, these are gross rental yields. Investment Property Databank produce a net yield index on commercial residential holdings (taking into account voids, management costs, repairs etc.) and this index knocks a hefty 200 basis points from gross yields on average. This index is specifically designed so investors can compare residential property investment against other asset classes.

As someone who owns a commercial property company, I have posted before on my experiences in owning residential property against retail (where the tenant is invariably on a full repairing and insuring lease). If people are stupid enough to believe that they can make 6.4% on average at present from letting residential, then good luck to them...

The reason why professional investors do so well is no different to a poker game where the suckers can’t calculate the odds and are taken to the cleaners by the pros. It’s like taking candy from a baby.

Share this post


Link to post
Share on other sites

20 year gilt plus 2% risk premium is the minimum you'd look for so about 6.3% is the bottom line, anything below that is crazy. I think that 9% you mention is nearer 12%, its all about location and the best yields don't come from a good location. It depends on what you're after, income or growth. Most pros are going after income at the moment in the belief that capital gains has some way to go

So the average rental yield in the UK is 6.4%

From a buyers point of view would you say this is an accurate guide to compare to ? it still seems quite low considering potential falls

The Price / Yield ratio seems to differ drastically from 5.5 - 9 % depending on type of properties , but the higher ratio are obv buy to let dreams (if there is such a thing) & you wouldn't choose to buy such a property as your home

How much does the average BTL aim for ? are rents still holding strongly , and do you see rents dropping with the market , or an after effect ?

How does your house compare :)

Share this post


Link to post
Share on other sites

thats because there is a wide gap between the highest asking prices on prime residential properties and the lowest sales on the poorer quality letting properties in the same roads.

i don't see any instances of 6 point something round my way in london. three or four point something percent all the way.

Share this post


Link to post
Share on other sites

20 year gilt plus 2% risk premium is the minimum you'd look for so about 6.3% is the bottom line, anything below that is crazy. I think that 9% you mention is nearer 12%, its all about location and the best yields don't come from a good location. It depends on what you're after, income or growth. Most pros are going after income at the moment in the belief that capital gains has some way to go

You are assuming that rent increases will cover maintenance and voids for that 2% risk premium. Just 10 years ago gross yields were around 12% at the same time that the S&P 500 had a yield of 1%.

Everything mean reverts eventually and will do so with a vengeance.

Share this post


Link to post
Share on other sites

The 6.4% figure is from 2008 but is quoted on a number of sites though i presume is Gross not Net .. just google it

http://www.propertyhawk.co.uk/index.php?page=magazine&id=412

The average rental yield of 7.9% for the top ten university towns outstrips the UK average of 6.4% for other buy-to-let properties.

London seems to fair worst of all .. why is that ? Low rents or overpriced houses ?

with places like Manchester Bolton & the Midlands (where i am) fairing best

Edited by Secret Squirrel

Share this post


Link to post
Share on other sites

I bet they're calculating it as yield to cover a mortgage with 30% deposit implictly taken off the value, or some comparable fiction

Share this post


Link to post
Share on other sites

Yields like prices are cyclic. At the start of the cycle prices are low and yields are high then as prices grow yields drop then prices slump and rents rise then it all starts over again.

High yields for residential ie cash flow properties are normally not found in the inner cities and are likely to be on the outskirts or regional areas.

But you generalize for the UK market. I know you have experience in the US where it can be the opposite. The highest yields are in the inner cities with the exception of NY, SF and a few others. Depends, of course, on how loose the planning laws are in the different states.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 144 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.