No property price bubble in sight as BTL yields grow

For a few weeks now, there has been talk about a property price bubble getting ready to burst. With prices on the up for a few months now, more properties coming onto the market and mortgage finance options increasing, it's easy to see where the concern comes from, although it does seem to be a little premature.

This week's Halifax House Price Index confirms that there is little or no threat of a bubble as house prices are rising more slowly. The latest quarterly increase was measured at 1.6%, the slowest since May. At the same time, mortgage approvals and home sales have risen sharply compared to the same time last year.

Part of this development may be the beginning of the seasonal slowdown in the property market, which may see activity remaining the same or dropping slightly as the colder weather sets in.

Looking at the buy-to-let market, London property specialists Assetz are seeing continued rental yields of around 7 to 8%. Those strong yields are connected to investors having bought when prices were relatively low. However, current price rises are not strong enough to lower rental yields.

Taking the maths one step further and considering combined capital and rental yields in Edinburgh, two current examples show that there are a number of very interesting properties for investors to consider. As prices are rising (and they are in selected areas of Scotland despite the quarterly average for the country), capital growth will follow, thus adding to rental yields.

These are exciting times for investors!