Assured Shorthold Tenancy Yields
Average AST yields stayed roughly stable in London in 2015, up to 6.3% from 6.2% in 2014, reflecting continued investor confidence in the London market. Rental increases in the capital have been fuelled by both strong tenant demand and a trend of rising house prices putting ownership out of reach for many. Average house prices increased by over 12% in London, roughly three times the growth in average UK rental values, so rewarding investors with a handsome total return.
AST yields outside of London saw a moderate increase to 9.5% from 2014’s 8.8%, but still below the rate of 11.4% in 2013. Overall, average AST yields at Allsop auctions are up to 9.1% (8.3% in 2014).
Regulated & Ground Rent Yields
Yields in the regulated tenancy investment sector have been roughly stable in 2015, typically remaining within the 4% and 6% band across the year, with highs of just over 6% in the February and July auctions and no significant lows.
Ground rent investments with over 80 years unexpired saw wider ranges in yields during 2015. In 2014 the general pattern of yields was between 4% and 6%. 2015 however saw yields range from 2% to 6%. We attribute this to the nature of the investments offered, rather than to any significant shifts in the ground rent market. On the contrary, we predict a sustained – perhaps even improved – demand for ground rents over 2016, particularly if the buy-to-let market for the smaller investor becomes more unpredictable.