Healthy buy-to-let yields are good news for investors and show the UK property market remains far away from another cycle of boom and bust.
Growing talk of a property price "bubble" is premature, property specialists Assetz have said.
Average BTL yields of 7% to 8%, and the strong market outside London and the South East, suggest there is plenty of scope for future property price growth.
Rental values are set to continue rising, further boosting landlord incomes as the number of renters surges in line with population growth, and supply shortages for sales and letting persist.
Stuart Law, chief executive of Assetz, said: “Yields can be used to assess the health of the property market, indicating whether a boom or bust is looming.
"The yields currently being achieved show investors bought at a good price. Prices would have to rise by almost half again to bring yields down to the pre-crash levels of between 5% and 5.5%, when investors were speculating solely on house price growth.
"Official statistics show minimal growth throughout the country, with the exception of London, thus talk of a price bubble is premature whilst investments are so cashflow positive.
A £100,000 property earning the current average gross yield of 8% would need to grow around 45% for the yield to be reduced to 5.5%, and even that figure assumes zero growth for rents in that time.
The most recent annual price growth reported by the Office for National Statistics was 4.1% across England, 1% in Wales and -0.7% in Scotland. London’s annual growth was 8.7% from August 2012 to August 2013.
Law said: "The more a price bubble is referred to the more investors begin to believe it and the speculation begins. Indeed we are already seeing the beginning of an expectation of growth returning rather than investors being solely happy with income.
"Right now, average yields are still offering investors healthy returns and our ‘yield yardstick’ indicates we are far from a market collapse.”
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