Rental return growth falling well below inflation - warning

Rents are up significantly in all regions and most notably in Greater London and Scotland according to the property website Home.

It says the lettings market continues to be “overwhelmed by demand” and this has driven the mix-adjusted average annual rent  across Britain up just over 17 per cent overall.

The typical gross yield on a two-bedroom flat in London has risen to 7.0 per cent it says.

Indeed rents across Greater London continue to rise, up 21.4 per cent year-on-year.

Low supply is still a persistent problem although the pace of the rent hikes in the more central boroughs has slowed somewhat over recent months.

The current new growth leaders in asking rents are the outer London boroughs of Brent, Harrow and Ealing (up 35, 34 and 32 per cent annualised respectively).

But Doug Shephard, director of the Home website, cautions: “Yields, whilst improving rapidly, are as yet nowhere near the level of inflation. Property, therefore, is not serving to protect investors’ capital against inflation, although the fact that yields are rising shows that returns on the underlying value of investment property are increasing.”

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