What property price bubble, asks buy-to-let firm

Talk of a property price bubble is premature, says a buy-to-let specialist.

Assetz says that yields, especially outside London and the south-east, are healthy because property is not overpriced – and there is little sign of speculation.
 
The firm says yields of 7-8% are typically being achieved, indicating that property investments are cash positive.

It says that just before the market peak in 2007, average regional gross yields were much lower at 5-5.5% which were not sufficient to cover running costs and subsequent interest rate hikes. Investors at that point were speculating solely on continuing price growth and happy to accept cash losses on rental income after running costs.

Stuart Law, CEO of Assetz, said: “Yields can be used to assess the health of the property market, indicating whether a boom or bust is looming.

“The good yields that are currently being achieved show that investors bought at a good price and that prices would have to rise by almost half again to bring yields down to the pre-crash levels where investors were speculating solely on house price growth.
 
“However, the more a price bubble is referred to, the more investors begin to believe it and the speculation begins.

“Indeed, we are already seeing the beginning of an expectation of growth returning rather than investors being solely happy with income.

“Right now, average yields are still offering investors healthy returns and our ‘yield yardstick’ indicates we are far from a market collapse.”