Strongest Investment Property Yields Found in Commuter Areas

After an interesting year in the property market, early 2010 is a crucial time for investors to examine their property portfolios and examine where the best yields are to be found. This is all the more important if one considers the growth in sale prices which overtook the growth in lettings values and the subsequent yield contraction of 55 basis points. The average property acquisition yielded 4.7% gross at the end of 2009.

The Investment yields in some of the desirable commuter areas remain higher than those of prime London property for Q4 of 2009. Sussex had the highest yield in the South East with Brighton and Hove giving a 5.5% average and Haywards Heath with 5.3%. Surrey followed with Guildford with 5.2% and Godalming with 4.9%. The areas North of London, such as St Albans, Ricksmansworth and Maidenhead it was average of 4.5% - 4.7%.

If one looks at the country sales market, there was a 3.1% growth in Q4 of 2009. This was built on the substantial gains of the previous two quarters and was the third consecutive quarter that saw an average prices increase for country market stock. One of the factors that influence this increase is the lack of good quality stock entering the market to satisfy waiting buyers. It is expected, however that as the market gains confidence the level of new instructions will increase and therefore moderate price growth.

Furthermore, the rise in new applicants is reported to be up 30% at the end of 2009 and therefore above 2007 and 2008 levels. Another justifying variable are the offer numbers that have been documented. The year finished strongly with sales up 30% and lettings up 21%.

These factors contributed to the rental market experiencing an average of 3.5% increase in prices throughout 2009. Furthermore, after the unrest of Q1, the rental market gained in Q2 and Q3 of 2009 and managed to preserve these and rose by 0.3% rise in Q4. The larger properties (4/5 bedroom houses for rent) led the way for letting values. They gained in excess of 1% each quarter. The smaller properties (3 bedrooms or less) saw a gain of less than 0.5% in 2009.

In summary, without any further economic crises there should be an uplift of 3%-5% across the country market in 2010. Financial service organisations are paying out the bonus payouts ensuring that there is a flow of money across the South-East once again. All the above indicators regarding investment yields, sales pricing, lettings pricing and the pace of the market point to the buoyancy of the UK housing market; the growth now stretches into the third financial quarter.