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Who Can Spot A Problem With This Table?

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From The ARLA Review & Index of Returns on Residential Investment Q3 2005



I think there may be a problem. Also maintainence has to cost a bit over 5 years which is not included. Am I being a bit thick or would this not worry you??

However they say:

The average capital asset value of rented houses has increased quite sharply over the last three months by 3.8% overall as a result of increases in all regions but most particularly in the rest of the South East where prices rose by 5.1%

Sounds great. It is no wonder that a quarter of all Buy to Let landlords entered the market in the last twelve months!!


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It all really depends on how they define the gross annual retal yield, etc. I can't get into the original pdf so don't know if that's in there. Don't know if its an annual rate of return, or cumulative over 5 years. What is the unit being reported, as well? Smarties?

Don't forget that if prices increase by 8.8% per year, a house bought for 100k at the start of year 1 will be worth 152k at the end of year 5.

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They seem to have taken the average increase in capital value for all regions, then applied that average to all regions?

They are using the average capital gain for the last 20 years.

Remember kids, past performance does not guarantee future results.

Having said that, some of the figures are quite interesting, especially the shockingly poor rental yields.

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The bit I can’t quite reconcile is the capital growth in the house: 8.8% compounded over 5 years is 1.52x whereas they appear to quote it as 1.76x. The higher figure (1.76x) is consistent with the 22.7% pa but implies a final house price of £501k, or an increase close to their £212k ‘increase in value’, but the lower figure (1.52x, 8.8% pa) is consistent with their £435 final house price.

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