Capital Growth & Rent Growth Correlations

[hwd007]

Capital Growth & Rent Growth Correlations

Is there a strong correlation if any, between the rate of capital growth and the rate of rental yield growth for an area ?

i.e if capital growth is at 10% does this mean that rent will command a 10% greater value for that area ?

I know there may be a lag effect between CG and rent growth but to what degree would the correlation between growth rates be ?

Thanks.
007

 

[Glenn]

Hi hwd007,

If anything, events of the last 20 years suggest to me that capital growth and rental growth occur in almost directly opposite phases.

Guys like Michael Yardney and Michael Croft could probably elaborate on this better than I due to them being seasoned campaigners through this period, however my experience started in 1994. For the first 5 years rents increased by about 20% for the period while capital gain was about 10% for the same period. Since 1999, I have found that rental growth has been slow but capital gain has been the driver.

Glenn

 

[Mr. Fabulous]

hwd007,
Check out the latest issue of Austrlian Property Investor. It has a good article there that will answer your questions for you. And the rest of the magazine ain't bad either!

Mark
'no hat, some cattle (but the herd is growing)'