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Geographic Yield Analysis

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Geographic Yield Analysis

Introduction
The purpose of this research was to identify the average yields within the different areas of the UK. Our research also aims to demonstrate the difference in yield between certain property types. This helps allow the applicant to identify if they are paying/offering a realistic price to purchase a property and, very importantly, what sort of a return they could expect to make!

 

The table below summarises yields from valuations received by Advocate Finance Ltd.

Single self-contained is a standard house or flat, let on one tenancy agreement.

Single
Self Contained
Houses of
Multiple Occupancy
Multi Unit
Block of Flats
Commercial
Property
South East 4.8 7.8 6.2 7
London 4.4 4.7 4.5 6.6
South West 5.1 9.6 5.2 No Data
East Anglia 5.7 11.1 6.7 10
West Midlands 5.6 9.6 No Data No Data
East Midlands 5.6 11.5 11.2 8.5
North East 8.5 13.3 10.1 No Data
North West 5.3 11.9 9.3 No Data
Scotland 8.8 13.7 No Data No Data

 

Observations
Houses of multiple occupancy (HMOs) provide a higher yield than the other property types. A factor is this would be the higher rental income due to each individual tenant paying an inclusive rent (with bills being included within the rent payments).
  • Multi-unit block of flats also demonstrates a strong yield, although the yields are lower than HMOs, the rental payments do not include bills as these are covered by the tenant separately. Therefore, taking this into account the net yields for houses of multiple occupancy and multi-unit blocks of flats are similar.
  • On average, the increase in yield from single self-contained houses of multiple occupancy is 5% across the UK.
  • As you travel further North, the average yield increase. This is due to property prices often being lower in the North, therefore these properties produce better yields. However, the flip side is they tend to produce less capital growth from property price inflation.
  • On average, London offers the lowest yield across all property markets. This will be due to the high capital value within the London area and contrary to the properties in the North, the rental income is lower. However, over time London has proven that capital growth is the strongest in the UK.
  • From the data we have analysed we are yet to see what impact Covid-19 has had on the commercial market.
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