BUY-TO-LET YIELD FALLS
The gross yield from residential property continued to decline in the first quarter of this year, to 8.34 percent from 8.38 percent in the fourth quarter of 2015, according to the latest residential yields review produced by First National Bank (FNB) and TPN.
After hitting a low of 6.56 percent in 2007, the average gross yield rose steadily to 8.58 percent in the fourth quarter of 2013.
John Loos, the household and property sector strategist at FNB, said it was possible that yields could decline further this year, before turning in 2017 as the impact of rising interest rates forces more consumers either to delay buying their own home or to sell their homes and rent.
The gross yield excludes a buy-to-let investor’s operating costs, which would have to be factored into the calculation to arrive at a net yield. Rode & Associates have suggested that about 1.5 percentage points could be subtracted from the gross yield to estimate a net yield. If this were done, the average yield would be about 6.84 percent.