London residential achieved total returns of 24.4% in 2014, according to IPD’s UK Annual Residential Property Index.
Rents grew 3.4% but net income fell to 1.8% as capital values soared. The IPD warned the sharp yields would price UK institutions out of the residential market.
Outer London figures showed similar trends – total returns increased 21.1% and rents increased 3%. Central London rents, on the other hand, increased by 4.8% in 2014, while total returns slipped from 14.7% to 9.8%.
Outside of London, the North and Scotland saw total returns rise by 3.5%, the first positive returns since 2007. Rents also increased at a firmer rate than 2013, up to 2.4% from 1.5%.
The South West and the Midlands returned 9.7%, the strongest outside of London.
Mark Weedon, vice president and head of alternatives at MSCI, said institutional investors could now consider build-to-let to achieve the stable, decent percentage income that foreign investment and yield compression are excluding them from in current market conditions.
Click on the buttons in the graph below to change the view between income returns, capital growth and total index returns. Hover over the bars to see absolute values.
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