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Property Yield As A Determiner Of Market Highs/lows?

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Can anyone shed any light on whether there has been any research into property yields signifying market highs/lows?

Surely rental yields are the best determiner of how overvalued or undervalued property is? My thinking being that rental yields are a far more stable indicator of what society can afford to pay than property prices that can be speculated up or down far easier (ie easy credit conditions, etc)?

So if property yields are the determiner then what is a typical cycle high and low? We hit what 3-5% yileds at the peak? From what I read previous property bottoms at around 8-15% or so? If so then this market still has significantly further to fall, or grind sideways nominally whilst property rents rise in real terms.

Has anyone seen any research into the cycle of property yields over time?

Thanks.

Edited by ringledman

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On a related point, is there an average ratio trough-to-peak/ peak-to-trough? I recently heard it remarked that bubbles take as to deflate as they do to inflate, is there any empirical truth to that?

Edited by kenzdawg

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Most proper investors would look for 8-10% yield, round my way (bournemouth) you could expect around 3%. Most serious investors would bother buying at the moment. However there is pently of spectulators that dont understand yield and investment that keep BTL going.

Agree that property still has a long way to fall.

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Would rather a hassle free liquid yield, than a yield that carries a cost that comes directly from the yield, is not very flexible or maneuverable required when circumstances/times change, that is when fast action is required. ;)

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Would rather a hassle free liquid yield, than a yield that carries a cost that comes directly from the yield, is not very flexible or maneuverable required when circumstances/times change, that is when fast action is required. ;)

A hassle-free yield of 4-5% is available from some of the lowest-risk[1] equities. Or 7-8% from blue-chip-backed fixed-interest if equity is too risky.

Thing is, 5% on property leveraged at 4:1 is 20% on your actual investment, which is not so bad even after paying an agent and insuring against bad tenants or voids. Who would lend you the money to leverage 4:1 on shares, or even bonds?

[1] also with low upside expectations.

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A hassle-free yield of 4-5% is available from some of the lowest-risk[1] equities. Or 7-8% from blue-chip-backed fixed-interest if equity is too risky.

Thing is, 5% on property leveraged at 4:1 is 20% on your actual investment, which is not so bad even after paying an agent and insuring against bad tenants or voids. Who would lend you the money to leverage 4:1 on shares, or even bonds?

[1] also with low upside expectations.

This is key. Property is the only leveraged investment the vast majority of people have access to. For 15 years people have made more money just sitting on their **** in their house that they could ever have hoped to have saved. Had the leverage been lower this would not be true.

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A few years ago I looked hard for some credible research on yields .... couldn't find any.

I suspect this is because historically, the institutional players focus on equities and bonds, perhaps because property was historically over regulated and illiquid.

I suspect there are a few phd theses out there just crying to be done.

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A few years ago I looked hard for some credible research on yields .... couldn't find any.

I suspect this is because historically, the institutional players focus on equities and bonds, perhaps because property was historically over regulated and illiquid.

I suspect there are a few phd theses out there just crying to be done.

A very quick google search turned this up:

http://boards.fool.co.uk/historic-rental-yields-9757379.aspx

Sure its an amateur effort and it only goes up to 2005, but the results are what you would expect.

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I've ben wondering this myself. Someone just bought ten flats in a court yard type thing, not a block, all one bedrooms. He paid £250,000 and the current rent is £220 per month, this is in Denbigh North Wales.

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Research will be out there but for commerical properties. I'm thinking shopping centres, etc.

I thought 'investors who held properties' held 1 or 2 spare properties on the side in addition to equities, bonds. "I'll rent it out"

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Residential investors aim for 8-10% at the moment . Investors are also going for Co-ops, Tescos express etc at 5-6% on 15 to 25 year leases.

Investors are even more savvy at the moment compared to a year ago when people were buying blocks of flats at 6.5% .

Fears of 20 years of problems are driving investors away from residential and to student hall style cluster flats at 10%.

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You can't take yield in isolation.

Try the differentials: yield vs interest rates, yield vs different measures of inflation.

indeed...every variable must be considered...IRs @ 10% destroys yield for those that invsted @ 1%.

the only reliable measure is what BORROWING can be granted to the masses. This will be down to sensible lending factors....Yields on rents would have the same criteria too...a renter cant pay more than he earns, same as a mortgagee.

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I've ben wondering this myself. Someone just bought ten flats in a court yard type thing, not a block, all one bedrooms. He paid £250,000 and the current rent is £220 per month, this is in Denbigh North Wales.

you have to wonder why they were sold?

same as you ask why a firm would give you secrets to riches...for a fee.

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A few years ago I looked hard for some credible research on yields .... couldn't find any.

I suspect this is because historically, the institutional players focus on equities and bonds, perhaps because property was historically over regulated and illiquid.

I suspect there are a few phd theses out there just crying to be done.

Property is only illiquid if you own it directly. Shares or bonds in a property company have liquidity.

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  • 277 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%



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