Monday, 23 June 2008

Rental yields "highest in two years"

These stories about rising rental yields really irritate me. Today, Paragon Mortgages again claimed that rental yields have hit highest levels for more than two years, in its latest buy-to-let index.

The troubled lender announced that landlords’ rental incomes have risen nearly 12% in the past year and 6% during the past six months. Meanwhile, property values have risen 7.5% year-on-year, although by just 0.2% over the past six months.

So how does Paragon reconcile their double digit rental growth with the rental inflation data produced by the Office of National Statistics. Here is there chart, which shows that rental inflation is running at approximately the same rate as RPI inflation:

9 comments:

Anonymous said...

You only care because you are an irredeemable renter.

VADO said...

London Estate Agent, I liked you better when you were not posting anonymously.

Anonymous said...

Yes, if the price of the property goes down but rent stays the same then the yield goes up.

What next from Paragon - water is wet?

Nick

aSteve said...

When it comes to Paragon, all you need to say is "share price".

Would you trust the abilities of a company whose value had gone from a meagre 564p to 77p in the course of a year? That's an 86% loss... why should their customers expect to fare any better?

Alice Cook said...

Nick, good point. Of course, if you bought a house last year and the price goes down but the rent stays the same, the yield goes down:

Yield=Dividend plus capital gain.

Mark Wadsworth said...

Damn. Nick beat me to it.

aSteve said...

Alice, if we are to accept your equation, maybe we should leave debt out of it too?

So, someone buys a £120K flat for £6K down, it rises 10% in a year - and rent covers the mortgage => 100% ROI... until you come to sell and it isn't worth £132K - it transpires.

electro-kevin said...

Wait until unemployment hits home.

The market simply won't be able to bear high rents. Not for single occupancy anyway.

unsecured debt consolidation loans said...

Rental inflation is actually alarming in the UK, but home ownership also has associated those bloody taxes that sometimes are hard to cope with.