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What rental boom?

Sadly, this picture is deceptive. Rents may be rising, but so too are consumer prices. In fact, rental inflation has been consistently lower than consumer-price inflation - 2.3 per cent compared to 2.8 per cent in May. The result is that real rents have fallen by nearly 10 per cent since their peak in the summer of 2008.

This is part of a wider problem: average returns from housing look too low to warrant serious investment. The two contributors to landlord returns are net rental yields and house prices. House prices have been roughly flat over the past year, and it is hard to be bullish about their immediate prospects given the weakness of consumer confidence. Yields - rents divided by house prices - have been rising with nominal rents, but remain paltry by historic standards.

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