What's happening with capital growth and yields this month?

publication date: Jun 26, 2015
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

What's happening with capital growth and yields?

In our rental summary, we track what’s happening to demand and supply as well as returns for landlords – this helps you know whether rents can go up or need to be kept competitive.

Kate's full June 2015 rental report summary

Capital Growth & Yields for Landlords
Acadata/LSL “The gross rental yield on a typical rental property in England and Wales stands at 5.1% as of April 2015; stable compared to 5.1% in March this year and 5.1% in April 2014. However, total returns have dipped on cooler property price rises. Taking into account changes in property prices and adjusting for void periods between tenants (but before costs such as mortgage repayments or maintenance) total annual returns on an average rental property now stand at 8.9% over the twelve months to April. This compares to 10.2% over the twelve months to March and 11.5% a year ago. In absolute terms this means the average landlord in England and Wales has seen a return, before deductions such as mortgage payments and maintenance, of £15,503 over the last twelve months. Within this figure rental income makes up £8,247 while the average capital gain amounts to £7,256. (Apr 15)”

RICS “On the back of tightening market conditions, contributors anticipate rents will rise across all parts of the UK over the next three months, with expectations most elevated in the East Midlands and the South West (although all areas returned solid readings). Over the next twelve months, rents are projected (by survey respondents) to increase by just under 3% on average at the nationwide level. Meanwhile, credit conditions appear to have eased further with the composite measure of ‘perceived’ LTV ratios edging up slightly (now standing a shade over 79%), a trend that has persisted in each of the past three months. (May 15)”

Kate's full June 2015 rental report summary

Kate Faulkner comments on Capital Growth & Yields:
“Although property prices are not rising everywhere and prices in most areas are lower than they were in 2007/08, where they are rising, investors have a dilemma. On the one hand they may want more stock to buy, but on the other trying to get a ‘bargain’ and a property deal to stack up income wise isn’t easy, which is why yields are falling. Property price growth however is helping to increase overall returns, reminding us that buy to let investment is mostly a capital growth one, not an income generating one.”

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