Why are residential yields so low?

Higher costs, lower risk, a better rental growth outlook and competition from less yield-sensitive buyers all help explain why residential yields have been below other commercial property sectors for the last 30 years. While some moderation in buy-to-let and owner-occupation demand looks to have narrowed that yield gap recently, the stronger rental outlook means residential net initial yields will remain around 70bps below all-property yields over the next five years.