Yields on residential property fell to 4.75% in January, their lowest level since August 2008, according to the latest Buy-to-Let Index from LSL Property Services,
Yields peaked at 5.1% in March 2009 when house prices reached the bottom.
Rents fell 0.5% in January and are now 2% lower than in September 2009 following the fourth month of consecutive declines. Declines were broadly spread by region. By contrast, house prices are 3.3% higher.
This followed a period of more intense activity in the housing market as investors rushed to benefit from the Stamp Duty holiday. The additional supply of rental housing pushed rents lower.
Total returns in January, combining rental income and house price growth were 16.7% on an annualised basis. This means a landlord would make a total return of £27,500 on a typical property this year. Almost £20,000 of this return would be in the form of house price inflation.
David Brown, commercial director of LSL Property Services, commented: “Landlords moved fast to add to their portfolios before the stamp duty holiday ended in December. This has meant higher rental supply at a time of year when tenant demand is traditionally quieter. Landlords have had to cut rents in order to avoid even costlier void periods.”