How much should the rent be for a given house price?

Eternal1 wrote: »

Is the 4% gross yield for most of the UK or could you expect 6% or 8% in places like London or Central London?

what is your background and why are you asking

if you seriously think that a single formula will give an "average" for the whole UK that has any meaning whatsoever you are very mistaken.

Are you asking from naivety or because you have read an article and think you know?

sal_III wrote: »

If anything the % is likely lower for London. The prices are absurd, while people that rent can only afford that much.

Yes the yields are pretty low in a lot of parts of London as the affordability of renters hasn't gone up to match what buyers can currently afford with the interest rates having been on the floor for the last howevermany years.

In my development you may have to pay £450-500k for a 2-bed (the better ones can be quite a bit more than that), but people can and do afford that (especially if they have some equity from moving up from another place that they've owned elsewhere in London). However the renters for that sort of a place don't have more than £20k a year to blow on rent, as that's £33k of gross salary before they pay their 40% tax on it, and it's not super luxury prime central London. So a headline figure of £20k ish rent (400pw) might be about 4% on a £500k flat.

However, the landlord in these sort of developments might be paying £3k a year in service charges so he only nets £17k from the £20k rent bill (taking the yield down to 3.4%)... and then if he has an agent managing it he's down to 3%... and assuming there is ongoing maintenance and empty periods etc he won't be making as much as 3% on it.

One in my building that's up for rent at the moment would probably sell for £450k+ and the landlord's agent started marketing it back in Feb for a pretty ambitious £2000 a month rent; but now four months later it's still empty so they've now dropped the advert to £1700pm (similar to the £20k/yr level mentioned before) and whoever takes it will probably haggle that down a little.

Eternal1 wrote: »

I believe the question marks in my posts make it pretty obvious I'm asking and not asserting. So yes, I'm asking out of naivety.

which does not answer the question - what is your background and why do you want to know?
Before wasting time explaining basic economic theory, market forces, what is "yield", how do you calculate it, and how to interpret it, it would be good to know what you do and don't already understand or have read. Otherwise this thread is just another load of hot air.

Eternal1 wrote: »

I was just asking if there was some rough ratio of rent to buy price. For example if a house costs £1million to buy obviously the rent isn't going to be £1,000 a month... Likewise a property that costs £250,000 isn't going to cost £5,000 a month.

I hope you understand what I'm trying to say.

I do - the answer is there isn't one, therefore, without accounting for a host of variables, these are 2 perfect answers:

£897:53/month - approx estimate, based on ARLA data & gov.uk trends. Perhaps a little less for an excellent tenant

Somewhere between 1% and 20%.

given your question a year ago about interest I'm guessing school's out for the holidays