Landlord yields equal a decade high

The average rental yield for landlords has bounced back to equal a 10-year high, research reveals.

According to market analyst Pegasus Insight, the average return on a rental property has climbed to 6.5% – equalling the previous high recorded in late 2024.

Data from this year’s second quarter shows a big regional divide in yields with landlords in the North West, North East and East Midlands seeing the best returns.

They are averaging more than 7% while in London, yields are a more modest 6.1%.

Landlords make a profit

Bethan Cooke, a director at the firm, said: “Yields at a 10-year high are a clear signal of the enduring strength of the private rented sector.

“Despite the significant challenges landlords have faced over recent years – from higher borrowing costs to shifting tax rules – the fundamentals of tenant demand and income generation remain robust.

“The fact that almost nine in 10 landlords are still making a profit demonstrates the sector’s ability to weather economic and policy storms.”

She added: “At the same time, the policy landscape is far from settled.

“The Renters’ Rights Bill represents the most significant set of changes in a generation, and while intended to protect tenants, it is also adding to landlord uncertainty.

“Our data shows landlords remain committed, but for many the coming 12 months will be a crucial period to review portfolios, financing and business models in light of what’s ahead.”

21% report a ‘large’ profit

The analysis also shows that 87% of landlords confirm they have made a profit.

Among those, two-thirds described their gains as ‘small’, while 21% reported a ‘large’ profit.

However, just one in 20, say they have made a loss.

Insight says the recovery in profits is taking place with the looming Renters’ Rights Bill which will have a big impact on the PRS.

That would see the scrapping Section 21 ‘no-fault’ evictions, moving to periodic tenancies and introducing new rules for tenants to own pets.

Awareness of the Bill among landlords is worryingly low with only 14% of them claiming to be fully briefed on the details.

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