Rising property prices squeeze rental yields
Rising property prices are causing an about-turn in rental yields, according to the latest Mortgages for Business Complex Buy-to-Let Index.
Gross yields on vanilla buy-to-let properties have dropped to 6.3% in the second quarter, down from 6.4% in Q1. This comes as modest rent rises have been outstripped by rapid growth in property values.
More complex buy-to-let properties still command considerably higher yields. Houses in multiple occupation (HMOs) saw gross yields of 9.3% in Q2 2014. While this is also down slightly from Q1 (9.6%), this gross yield remains around 50% higher than for vanilla properties.
Multi-unit freehold blocks (MUFBs) also offer a premium compared to standard buy to let investments. In Q2 2014 these properties commanded an average gross yield of 7.3%, almost a full percentage point higher than vanilla yields.
Landlords with standard buy-to-let properties have remortgaged at a record rate in Q2. Remortgaging now represents more than two-thirds (70%) of new vanilla buy-to-let mortgages. This compares to 65% in the first quarter of 2014.
http://www.landlordtoday.co.uk/news_features/Rising-property-prices-squeeze-rental-yields
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