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Regional Rental Yields Continue to Out-Perform London and the South East

Residential markets in prime and secondary regional centres are continuing to exceed growth in London and the South East, says new research.

Residential markets in prime and secondary regional centres are continuing to exceed growth in London and the South East, says new research.

In their post-Brexit yield analysis, real estate company CBRE claims that the UK’s residential investment sector is ‘holding its own’ despite a slight drop in activity and weakening in secondary markets.


In contrast to other asset classes, such as commercial property, yields in the UK’s residential sector have remained afloat with figures revealing an average gross yield of 6.0% and an average net yield of 4.48% for August and September, across all UK residential markets listed in the report.


Categorised across five different areas – London’s zone 2, zones 3-6, outer London & the South East, prime and secondary regional centres – CBRE highlighted a clear disparity between London and the South’s residential market when compared to other regional markets.


Figures show that the average gross yield for prime property in London’s zone 2 and zones 3-6 stand at 4.25% and 4.75% respectively, with these type of assets being described as having good access to public transport and an excellent underlying demand.


Rising above the gross yields found in London’s central zones, gross rental yields for prime properties across the outer London area and the South East are higher, at 5.25%.


Whilst this represents an increase, prime regional centres showcase more substantial gross yields, with the average standing at 5.75% for prime property and 7.25% for secondary property (or assets that are located at a distance from a public transport hub and with limited underlying demand).


Furthermore, when looking at secondary regional centres, gross yields for prime and secondary property are as high as 7.00% and 9.75%, respectively – with CBRE indicating a stronger rental yield performance at these locations.


Key locations highlighted by CBRE included Manchester, Sheffield and Acton, where substantial and international investment is taking place.


Earlier this week, the newest Office for National Statistics report highlighted a rise in rents across the UK, with a year-on-year increase of 2.3% in August.


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