A key factor behind rental yields being very low was that the price of residential property rose so strongly – far faster than rents – in the earlier part of this decade, and has stayed high in most places in the country. While capital gains were occurring, it mattered little to many investors that rents as a running yield were low.
Moreover, as noted above, in view of incipient inflationary pressures, policy rates in our case may have to be tightened ahead of those in advanced economies. The resultant larger interest differential may attract larger capital inflows. Will capital inflows be modest or turn into a flood as in 2007?