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The latest instalment of the Buy-to-Let Index highlights the buy-to-let coldspots - those postcode areas which have seen average rental yields fall the most over the 12-month period between August 2015 and July 2016.
Durham topped the coldspot table, with average rental yields having crashed by 34.2% over the 12 months from 7.09% to 4.67%.SEE ALSO - Blackburn tops BTL yield hotspots Which property type offers the best potential for yield?DON'T MISS - BTL hotspots - where to buy in 2017?NEXT UP - Directory of property hotspots and notspots!NOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
One should be careful about which conclusion to draw from such an analysis. Yield may fall because property values have increased, rather than because of a reduction in rental demand.
2015: Price = 100,000; rental pcm = 600; (gross) yield = 7.2%
2016: Price = 120,000; rental pcm = 600; gross yield = 6.55% - that's a reduction of 16% in gross yield, even though you've made 20k capital gain.
Even if rent went UP to say 625 pcm, if capital value rose from 100k-120k, the gross yield would still be DOWN 13.2% year on year.
4.6% yeild in Durham just think what S24 will do to areas like this
If I was on a yeild so low I would worry
Learn Change and Adapt ?????
Does this mean that rents have dropped by just over a third in Durham, or am I missing something.
No, it's saying that rental YIELD has dropped by just over a third. Yield in this case look like it's been calculated by dividing the annual rent by the average house price (basic 'gross' yield). So, as Rassie points out, if the house prices have gone up, yield will have dropped, or if rents have gone down, yield will also have dropped. What's actually happened may be a combination of the two, but there's no way of telling from the basic data presented. And if you already own property in that area, it doesn't matter too much if yields have dropped because of current house prices rising - you already 'locked in' your yield based on what you paid for the house at the time you bought it, as far as I'm concerned.
More BTL coldspots revealed by the new TotallyMoney Buy-to-Let Yield Map, which highlights the UK’s buy-to-let hotspots providing both an interesting insight into the market and a useful tool for buy-to-let landlords.Full/source story