Buy to let yields may be falling, but no one should really care about a meaningless figure that just measures past performance.
Yield looks at the historic investment performance of a property by assessing the income generated against the cash invested in a buy to let home.
Many letting agents and property companies talk about buy to let yield as if the figure was a key indicator.
However, looking at buy to let yield is pretty much a waste of time –for instance high rent/low yield investment property in London are unlikely to surpass the magic 5% number property experts suggest is the minimum a buy to let should return on investment.
Yet high yield/low rent properties around the country purport to be much better investment prospects.
Leading lender BM Solutions reckons average yields fell towards the end of last year from 5.6% to 5.5%, with even lower returns in London at an average 4.8%.
However, the average rent is £1,417 a month in the capital, more than double the national average of £701.
Homes in the North, Yorkshire and Humber offer higher buy to let yields of around 6%, and rents are about £500 a month, nearly a third of the price in London.
The average property value in London is £409,881, compared to £98,292 in the North East, says the Land Registry.
The figures do not mean a lot – but more than likely signal another switch in the buy to let market.
Property investment moves on a cycle swinging from high yield to low yield.
At high yield, rents are moving up and prices are standing still.
At low yield, rents stand still and prices rise.
The last low yield cycle was in the run-up to the property bubble bursting in 2007. Since then, the cycle has swung to high yield, and now rents are levelling out but house prices are increasing again.
Yield is irrelevant – it’s whether an investment is making money that counts.