Residential Auction Annual Review 2014
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Yield Analysis

Assured Shorthold Tenancy Yields

The bar chart shows that average AST yields have fallen both in London and across the rest of the country. Tenant demand has put upward pressure on rents as those unable to get a foothold on the housing ladder are forced into the private rented sector. Investors attracted by this improved security of income have competed aggressively against would be owner occupiers in the auction rooms. As capital values have risen at increasing rates, lower rates of return have become acceptable.

London AST yields are down to 6.2% (from 7.1% in 2013). Outside of London, average yields across the UK have fallen to 8.8% (11.4% in 2013). Overall, average AST yields at Allsop auctions are down to 8.2% (10.4% in 2013).

Regulated & Ground Rent Yields

There has been little yield compression in the regulated tenancy investment sector since Q1 2013. Returns have remained largely within a band of 4% and 6% from Q1 to Q3 2014. However, Q4 saw a drop to sub 3%. We believe that this is partly due to the more reversionary nature of the regulated investments which were brought to the market over this period.

Ground rent investments with over 80 years unexpired have shown a steady yield pattern, typically remaining between 6% and 4% (16.6 and 25YP). This is consistent with 2013.