BTL yields slip in September

As of September the gross yield on a typical rental property in Scotland stands at 4.0%. This represents a fall of 0.2 percentage points since September 2013, when the gross yield on a rental property averaged 4.2%, as well as monthly dip from 4.1% in August.  

Taking into account price growth alongside void periods between tenants, the total annual return on an average rental property stands at 9.5% in the twelve months to September. This has climbed from the 3.8% annual return buy-to-let investors could expect in September 2013, and also represents a rise on a monthly basis from 9.2% in the year to August.

In absolute terms this means the average landlord in Scotland has seen a return, before any mortgage payments or other deductions, of £14,392 in the last twelve months.

Looking ahead, if rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in Scotland could expect to make a total annual return of 5.0% over the next year, equivalent to £8,019 per property.

Gordon Fowlis comments:

“Robust gross yields are emboldening aspiring property investors to build on the number of available homes to let, attracting further investment on a reassuring foundation of solid and sturdy returns. Recovering house price growth and steady rental income has renewed interest in buy-to-let as an alternative capital investment or plan for retirement, and it’s not only landlords who reap these benefits.

Up against ceaseless tenant demand, the only market mechanism that can keep rent rises bridled is supply. So by contrast, if further investment is discouraged by external factors, competition for homes to let will unleash wilder rent growth.”