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Buy to Let

Rental yields continue to drop

Mortgage Solutions
Written By:
Posted:
31/07/2007
Updated:
31/07/2007

Rental yields are continuing to fall for buy-to-let investors, a study has shown.

Rental yields, which represent an investor’s rental return as a percentage of capital investment, have been gradually decreasing since 2003, with rental yields in London now falling at the fastest rate.

Lee Grandin, managing director of Landlord Mortgages, said: “We can attribute this continual trend of falling rental yields to the fact that there is greater investment occurring in the Southern regions – especially London.

“Huge City bonuses this year have led to a surge of buy to let in the capital, pushing prices up in this area.”

Rental yields in London fell from 5.96% in the first quarter to 5.38% in the second quarter, the largest decline in the UK.

Scotland recorded the lowest decline, falling from 5.99% to 5.85%.

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The capital’s decline in rental yields has been affected by recent rises in house prices.

The average London house price jumped up to £300,000 in June, causing rental yields to fall.

Grandin said: “These falling yields are not a sign of the buy-to-let market weakening, quite the opposite.

“As landlords begin to increase their rents in line with the value of the property, we expect to see rental yields back up again.”


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