2023-6-20 17:27 |
Quick Take Since the Global Financial Crisis (GFC) in 2008, a zero-interest rate policy and quantitative easing as the norm for the past 15 years. This policy has contributed to asset inflation, which is anticipated to reverse. The extent of this reversal, however, remains uncertain. Both the equities and real estate sectors flourish in an environment of inexpensive credit. Yet, the incentives have shifted with treasury yields at the start of the yield curve now surpassing 5%. Dylan LeClair, an analyst at Bitcoin Magazine, has circulated a chart demonstrating that the current yield of the U.S. three-month treasury rate is roughly equal to that of the S&P index yield and U.S. corporate bonds (below). As treasury yields are globally recognized as the “risk-free” rate, the appeal of holding other assets is diminishing, especially when they all return approximately 5%. Moreover, the average rental yield in the U.K. for real estate ranges from 5-7%. This falls below the Consumer Price Index (CPI) inflation rate and is less appealing as gilt yields begin to climb above 5%, rendering them a potentially more attractive investment option. Rates: (Source: Bloomberg/FT) Region Area Gross rental yield East Midlands City of Nottingham 6.49% Boston District 6.01% Mansfield District 6.00% East of England Fenland District 5.60% City of Peterborough 5.49% Great Yarmouth District 4.56% London Barking and Dagenham 5.12% Newham 4.87% Bexley 4.80% North East Hartlepool 7.64% Middlesbrough 7.61% Sunderland 7.61% North West Burnley 7.92% Liverpool 7.02% Hyndburn 6.98% South East City of Portsmouth 5.60% Gosport District 5.54% City of Southampton 5.54% South West City of Plymouth 5.64% Gloucester District 5.45% Swindon 5.40% Wales Blaenau Gwent 7.02% Merthyr Tudful 6.54% Rhondda Cynon Taf 6.44% West Midlands City of Stoke-on-Trent 6.63% Coventry District 6.04% Newcastle-under-Lyme district 5.98% Yorkshire and the Humber North East Lincolnshire 6.72% Barnsley District 6.45% City of Kingston upon Hull 6.42%
Rental Yields (Source: Zoopla)
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