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Will Buy-To-Let Bust in 2017?

December 15, 2016

Our latest data shows that sale transaction levels across London have fallen dramatically. Mark Lawrinson discusses what this means for rental yields - plus gives his tips on investing in this market.

The London borough heat map

Let’s begin by looking at our first heat map from 2014. We can see here that there were already parts of central London that were beginning to drop in terms of rental yields. The pale blue areas are less than 4% in terms of yield, the yellow areas are 4-5%, the pink areas are 5-6%, and the red areas were achieving a >6% yield.

The Only Way is Essex!

You can see that Hounslow, Redbridge and Barking and Dagenham were still offering extremely healthy yields >6% yields. In contrast, the map shows that prime central London areas were already struggling in terms of yields.

Fast forward to 2015 and our heat map is getting decidingly cooler. In fact, we can see that the majority of boroughs are now offering 3-4% yields, with Wandsworth, Kensington, Barnet and Camden achieving less than a 3% yield. Barking and Dagenham is trying to stand strong on its own, achieving a robust 5-6% yield.

Bring it forward to 2016 and our heat map has turned into a cool map! The majority of London is looking at a 3-4% yield, though we still have Newham, Haringey and Barking and Dagenham leading the fight and charging the gates at 4-5%.

Will 2017 bring higher yields?

My recent article, Will House Prices Fall in 2017, stated that transaction volumes across London are now more than half of what they were before the 2008 crash, and 48% lower than what they were this time last year.

A drop in transactions means that we’re likely to find that we have less landlords coming to the market, or adding to their portfolio. Despite this, the population is growing, the job market is buoyant, and people are still coming to live in London - so while supply may decrease, demand will continue to grow.

It’s this imbalance that’s actually likely to increase rental prices, while weaker transaction prices will push up rental yields. So as much as the transactional data is worrying, established landlords will be pleased to know that we're going to see the cool map heat up again.

How can we help?Instant Valuation

The Portico yield map uses granular street data to give landlords and buy-to-let investors an instant indication of where in London an investment would pay off most. Despite the fact that our map looks quite cool - within boroughs you can still find pockets or streets that are achieving extremely good yields as a result of companies or students moving into the area.

So if you’ve got your eye on a property, find out the yield you could achieve in a few simple clicks.

How much is your property currently worth?

If you’re concerned or curious with what’s going on with your property’s value in light of what’s going on in the market, our Instant Valuation tool will give you the ability to check out what your property is worth in 60 seconds!

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