Yield versus Capital Appreciation – what do the figures say?17 Mar 2021
Should I concentrate on rental yield or capital appreciation? A common questions and one I always like to revisit from time to time!
I looked at some figures for average property price increases over the last 20 years, primarily because most investors are looking for a long term investment – so let’s see what has actually happened in some popular areas around Glasgow over the past 20 years – warning – this might surprise you!!
Areas which are notoriously great for capital appreciation actually are not the highest achievers – so Bearsden had the lowest appreciation over the last 20 years, Hyndland was not in the highest rankings nor Park, the winner was Dennistoun which is not that surprising given its increasing popularity but I think its really interesting how this looks. (Figures taken from Zoopla records).
I generally tend to be focused on yield for investors because as you can see, the difference in terms of capital growth is small – ranging from 4.9% to 6%. So why focus too heavily on capital appreciation? If you focus on yield you improve your cash flow and by buying sensibility you get the right balance between yield and capital appreciation. The sweet spot is where you achieve both- so look at the one with the highest point for both – if you invested in Govan back in 2000 you are winning!
Of course, it’s all about finding the next Govan…what are your predictions?