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Buy to let yields continue to fall

In a sign of strength in the UK property market it has been revealed that the average buy to let property now commands a rent of 4.75% as of January 2010 compared to a peak of 5.1% in March 2009. Despite the fact that UK property prices have risen over the last few months, many landlords have found it difficult to push through rent increases and indeed an increase in the number of rental properties has put pressure on rental income.

While it is perhaps too soon to start and sound the alarm bells, the fact that real rental income is falling at a time when property prices are increasing is a concern. Landlords throughout the UK need to appreciate that to avoid the problems of the past there needs to be some form of balance between rental income and the capital appreciation expected from properties. It will be interesting to see how actual rent and rent yields perform in the short to medium term because the more expensive house prices become the more difficult it will be for new entrants to the buy to let market to cover their mortgage payments out of rental income.

Many buy to let investors suffered a collapse in their portfolios as the credit crunch and the economic downturn hit home. Hopefully it will be a case of "once bitten, twice shy" and buy to let investors will not fall into the same traps again!

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