Negative Expat Investment Returns On Prime Properties Now In Reverse

Five-year negative investment returns on prime residential rentals in major world cities are now in reverse as the sector improves.

Since 2014, declining rental yields on prime residential properties in major world cities have been disappointing expat investors, but the trend may now be in reverse as average yields have improved by 0.2 per cent and are now outpacing increasing property values. A survey by a leading international real estate firm identified Los Angeles as top of the tree as regards yields, with rental growth now at 6.1 per cent, mostly due to a trend towards renting rather than buying.

According to the study, cities in the USA endured a fall in capital growth last year, mostly due to changes in tax laws and oversupply, but cities in the Asia Pacific region fell below the top 20 with the exception of Singapore, Kuala Lumpur, Tokyo and Bangkok. Again last year, Hong Kong saw the highest rental charges at $7,000 weekly, and New York’s high-end apartment rental rates topped those of houses.

For expat property investors, Los Angeles’ yield tops out at 5.50% followed by Moscow at 5 per cent, Cape Town at 4.70% and Dubai at 4.60% along with Bangkok. New York came in at 4.50%, with London at a disappointing 2.90%. Over the past decade, UK buy to let property fast became an expat investment favourite, especially after mortgages became far easier to get. However, the trend took off most successfully in former Northern industrial hubs such as Manchester as well as university towns short of student accommodation.

Housing was far cheaper than in the south of the country and, in general, returns were satisfactory and capital appreciation was greater over shorter periods of time. Nowadays, property prices in such areas are now far higher and lenders are tightening up due to fears of negative Brexit effects after the end of this year.