Investors should be encouraged by high rental yields

With frequent news and reports of rent rises throughout the UK, Townends Estate Agents comments on why landlords should be encouraged by the higher figures.

Related topics:  Specialist Lending
Millie Dyson
26th September 2011
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Caroline Kavanagh, Group Lettings Director of Townends estate agents, says:

“The demand for properties has driven rents up over the last four years, and the past 12 months has seen a fast paced rental market”, a point reiterated in one recent report from LSL Property Services which found that the cost of renting a home rose at its fastest rate in a year.

“These continued rising rents, coupled with house price adjustments in recent years means we have seen significant increases in rental yields, and these improved returns should give landlords greater confidence.”

“Since the height of the market in 2007, house prices, although they have stabilised more recently, have fallen perpetually.

"For some time now, even with lower house prices, many potential buyers have found it more difficult to purchase due to high deposit demands and have been forced to rent.

"This has created a busy rental market, inevitably pushing rents up. In the coming months we are anticipating further rent rises, therefore rental yields should also continue to improve.”

The survey suggested that London had seen the biggest rent rises in England and Wales in the last year.

Caroline comments:

“This is certainly being shown in some of the yields being achieved this year throughout our London branch network. For example, a one bedroom apartment in Putney achieved a 3.6% yield in 2006 but a 4.9% yield in 2011.

"This is a great return. When looking at London, a general rule of thumb in the current climate is anything from a 4.5% yield up is good.

"Having said that, there are ‘better than good’ opportunities out there and in some South London locations 6% returns are being seen.”

Within the Surrey location, another operation area for Townends estate agents, Caroline says that landlords could be achieving as much as a 5-7% return, and in some cases even higher:

“We are seeing one – two bedroom properties being let for nearly a £1,000pcm, for example, in Woking, offering fantastic yields."

Caroline concludes:

“We are already starting to see landlords venture back into the market as a result of better rental yields versus four years ago, and a far better security than investing in the stock market or simply putting finances in the bank.

"However, I would encourage unsure investors to now be looking at expanding their portfolio and looking at property as offering them the best return for their money.”
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