BUY-TO-LET YIELD FALLS

Weekend Argus (Saturday Edition) - - LIFE -

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.

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