Letting Index

June 18th 2014
By: Melanie Hollidge

Countrywide Monthly Letting Index for May 2014 shows that landlord returns have risen by a huge 45% over the last year due to the increase in house prices.  The average total return increased by 12.2% which is up from 6.8% only a year ago.

Rising house prices in the south of England, along with strong capital growth, also drive up landlords’ returns – yields only account for 6.1% of this return.

Before May last year, sub inflation house price growth has meant that only 10% of landlord returns came from capital appreciation – this has typically only accounted for 25% over the last ten years.

Nevertheless there are significant variations across the country – in London, where yields are lowest and house prices are rising fastest, rent has only made up 25% of landlord returns during the last year, the other 75% has been sourced totally from rising property values.

“Since 2013, capital growth has formed a growing part of the return for landlords across London and the South East of the UK. Although rents, alongside wages have grown strongly, they have lagged behind rising house prices. While inevitably this has led to a degree of yield erosion, when looking at yield and capital appreciation together, the total returns have increased by 45% over the past 12 months.” Says Countrywide group commercial director Nick Dunning who goes on to say, “Conversely, parts of Northern England and Wales have seen yields grow as house prices have recovered much more slowly. In 2013, rising rents outstripped house price growth across most of the North.