Time to buy to let?

Apparently the yield on terraced houses is now running around 6-7 percent - the highest of any type of property apart from detached houses. (Flats yield significantly less; so do semis.)

Now that's not at all dusty compared to the Bank of England interest rate at 3%. Could it be time to buy?

Well, possibly not. There are some quite good counter arguments.

• Prices of houses are still dropping and expected to fall further as the economy declines, with low consumer confidence and increasing unemployment. (Compared with cash - inflation is at 5.2% and expected to decline; that's the diminution in the value of your cash, so to compete, property prices would have to fall less than 5% over the next year. Most forecasts are for significantly more.)
• Though the Bank of England rate has been cut to 3%, it hasn't really affected the interest rates being charged in the retail market. You can still get 6% on notice accounts and fixed rate bonds. Equally, you won't get a mortgage anywhere near 3%.

But it does seem that price falls so far in the residential property market have driven yields up to the point that property is once again competitive with better rate bank accounts, rather than - as happened in 2006 - yielding considerably less. Smart purchasing could drive initial yields up to 10%.

But I think before I jump into residential property again, I'm going to wait for yields generally to approach the 10% level. That's the point at which the market represents a real bargain - and though we're on the way, we haven't got there yet.