Rent yields at highest level since Feb

While the rate of house prices growth is flattening there is some good news for property investors and landlords. Informetrics says that rental inflation edged higher over the final quarter of last year and that tenant demand for rental accommodation remains relatively strong.

Wednesday, January 16th 2008, 5:00PM

by The Landlord

“This development was backed up by the number of bonds processed by the Tenancy Services Bond Centre, which was up 7% for the 2007 calendar year,” Informetrics managing director Gareth Kiernan. says. “Growth in the number of bonds was the highest since January 2005.”

He says that demand for rental accommodation appears to be solid across all dwelling sizes.
The one exception is four-bedroom properties where rental inflation has dipped to its slowest rate since mid-2006.

Kiernan says this trend may be a result of increased pressure on household budgets from higher food and fuel costs, encouraging families to “economise” on the number of bedrooms when choosing a property to rent.

With house price inflation easing over the December quarter, gross rental yields crept up to 4.39% – higher than at any time since last February.

“However, the upward trend in real bond rates continued as well, and the gap between rental yields and real bond rates remains almost a full percentage point below the average.

“Upward pressure on yields will continue over the next year as wholesale interest rates remain high. Some of the correction in rental yields is likely to occur through falling property prices.”

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