The research showed that Scotland’s rental yield rates have fallen at a much slower rate than England’s, with the difference between the countries rising 0.28 per cent in Q1 2007 to 0.43 per cent in Q2 2007.
Scotland saw yields of 5.85 per cent, down from 5.99 per cent in Q1 2007, while London recorded the largest decline, falling from 5.96 per cent to 5.38 per cent. England had a slightly less dramatic fall from 5.82 per cent to 5.42 per cent.
Landlord Mortgages stated this pattern of falling rental yields was mainly due to high house price growth in recent years and relatively static rents. This has been highlighted by the fact that London’s yields are falling at the highest rate due to the high house price growth in the region.
Lee Grandin, managing director of Landlord Mortgages, commented: “These falling yields are not a sign of the buy-to-let market weakening, quite the opposite, as highlighted in the year-on-year growth of our lettings agency. As landlords begin to increase their rents, in line with the value of the property, we expect to see rental yields pick up again – hopefully by the end of the year.”
Andy Frankish, managing director of Mortgage Talk, said: “Rental yields will recover as interest rates increase and affordability bites over the next 18 months. The rental market is the opposite of the housing market where there is an undersupply pushing prices up. In many cities it’s reaching the point of oversupply, though there is still good investment to be had in smaller towns.”
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