Buy to let yields surge to 14-year high – Paragon

I’m guessing the figures are gross yields, to tempt the unwary in the PRS. The real yield after expenses and taxes are taken into account will paint a very different picture.

Rents are high, taxation is high, returns are low.

If house prices fall because SDLT has been increased, yields will be even higher however, the landlord won’t have more money from their investment and capital growth will be hit.

Tell me, what’s the good news?

Spin, spin and more spin. BTL lenders are trying to put a gloss on a worsening situation. As smaller landlords (who account for much of the PRS) leave the PRS in anticipation of difficult times ahead their properties are generally not being sold to existing or aspiring landlords. The sold properties don’t disappear, somebody is living in them, just not PRS tenants. As PRS supply drops off rents rise and so do yields for those willing to take on current and potential future risks. Wales generally has more stringent regulations and protections for tenants than England, so more landlords are selling up, PRS properties are more scarce, so rental yields are the highest..

Yes the rents are increasing for now and I am sorry to put a damper on things but what happens when we have the RRB and the new tribunals take say 6 months to review rents and the new rent will only come into effect from the day they make their decision.
What is to stop a tenant accepting a property at the advertised rent and then applying to the tribunal and the tribunal then deciding to reduce it.
This will be encouraged by Shelter, Generation rant and others and could become a good way of controlling rents.
With the RRB we have heard the NRLA talk a lot about a mandatory ground for us to have vacant possession if we want to sell but they are now expecting that we will have to make a case for possession which will mean that vacant possession will be at the whim of a Judge and if wecannot get possession then we might be forced to sell with a protected tenant at a considerable loss.
Perhaps these yields may not be as attractive as they appear to be.

This will be a growing trend as the supply-demand imbalance gets further out of whack. Don’t forget, Labour has frozen the income tax thresholds and more rental income will push some landlords into higher tax even though sec 24 ensures they’ll never realise that income. Good times!