Rental yields show signs of improvement

Recent data from Landlord Mortgages, the buy-to-let specialist, suggests that rental yields are showing signs of recovery, after months of a downward trend.

Rental yields have been falling since the end of 2006, largely as a result of property price inflation and static rents.

However, in the three months to the end of September 2007 yields in Scotland increased by 0.18% (from 5.85% in Q2 to 6.03% in Q3).

Yields in England remained static, at 5.42%, although London yields continued to decline, falling to 5.25% (5.38% in Q2).

In recent times buy-to-let investors have been relying on property inflation make a profit.

With the housing market set for a period of stagnation, or even a fall in prices, any indication that rental returns are rising will be welcome news to landlords.

Landlord Mortgages expects rental yields to increase further by the turn of the year, particularly in view of the fact that a loss of confidence in the housing market may lead to increased demand in the private rented sector.

Estate agents are reporting a decline in prospective purchasers and potential first-time buyers are staying at home or in their rented accommodation amid fears that the housing market has peaked.

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