average yields are closer to 3%, before interests go back up!

Killerseven

michaels wrote: »

Shares don't yield very much either and yet people still buy them....

People buy them with the hope of good yield, they are usually disappointed, so yes very similar to property.

Killerseven

Generali wrote: »

Gross or net yield?
Also, how do you account for depreciation of the house? (land appreciates but houses depreciate).

Exactly right, but some people have been brainwashed to thinking the property only ever goes up....

cells wrote: »

Inner London typical of lower end flats is about 5% return on the value of the flat

We what I mean?


On the other timbeeeer thread by Graham, parts of London have fallen by over 20%.

How do you measure yield if your property has depreciated by over 20%?

lisyloo

Most landlords bought some time ago and are sitting pretty. Most are aware of the risks.
Yes a few that buy today may get in trouble just like owner occupiers.

The 20% drop in an interesting theoretical question. It applies to areas like Kensington, Chelsea etc. so doesn't affect many ordinary people or landlords. However if I was measuring my personal yield i'd use the price I bought the property and not current values.
One issue at the moment is that there aren't many alternatives at the moment so whilst low single figure gains aren't fantastic it's better than a bank account, so it's certainly not the case that low yields aren't worth it.
If you scale up a marginal advantage then it can do well.
I think low yields will put off new landlords but there isn't a compelling reason to sell for those who bought at much lower prices.

wotsthat

Killerseven wrote: »

How do you measure yield if your property has depreciated by over 20%?

If you mean the house as distinct from the land it probably doesn't matter when calculating the yield because it's rent divided by current value multiplied by 100. If the property has depreciated (rather than the land) that would be picked up in the current value (land plus house) or possibly it would command a lower rent to reflect this.

It's an interesting thought about where the returns on investment come from because a better yield might be achieved by just buying land. I.e.landlords might be proving a service for 'free' just as a mechanism to hold the appreciating land.

ukcarper

Am I right in thinking that if a landlord keeps rent the same but house goes down in value his yield increases.

wotsthat

ukcarper wrote: »

Am I right in thinking that if a landlord keeps rent the same but house goes down in value his yield increases.

His total return has fallen but, yes, his yield increases.

ukcarper

wotsthat wrote: »

His total return has fallen but, yes, his yield increases.

Yes that's what I though so for the majority of landlords who did not buy in the last few years the reason their yields have gone down is because the value of their property has increased in value. A point that seems to be missed by OP.