Rental yields for landlords hit highest level since 2018

9:37 AM, 2nd May 2024, 2 years ago 8

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Landlord News Lettings & Management Property Investment News

Landlords are enjoying their highest rental yields in six years, with the average gross yield reaching 6.1% in the first quarter of 2024.

This is the third consecutive quarter of increases and the highest level since the second quarter of 2018 when landlords saw average yields of 6.6%, according to research by Paragon Bank.

The study, which surveyed nearly 800 landlords, also found that properties in multiple occupation (HMOs) delivered the highest yields, averaging 7% compared to 5.8% for single self-contained properties.

Ways to maximise returns

The bank’s managing director of mortgages, Richard Rowntree, said: “Against what has been a challenging economic backdrop, landlords are naturally looking for ways to maximise returns, but they are also attempting to mitigate the impact of a tax burden that has increased in recent times.

“Alongside their yield generation potential, HMOs appeal to investors because of strong demand for affordable homes, particularly in areas where tenants would perhaps not be able to afford to buy or rent a whole property.”

He added: “This is particularly evident at the moment, with high levels of rental inflation.

“Alongside a stabilisation of house prices, it is likely that this has contributed to improving yields.”

Landlords in the North East enjoyed the highest yields

Regional variations show significant differences with landlords in the North East enjoying the highest yields at 7%, followed by Yorkshire and the Humber at 6.6%.

London’s landlords, however, saw the lowest returns, with those in outer London at 5.2% and central London at 5.7%.

Paragon says this is down to the capital having higher than national average property prices.

Wales came in second-to-last in the bank’s league table with yields of 5.6%.

‘Strong yields are good news for landlords’

Mr Rowntree said: “While strong yields are good news for landlords, we recognise that this rental inflation poses a very real challenge for tenants so are buoyed by reports of improving levels of housing stock in the sector.

“This is because addressing the imbalance between supply and demand is central to keeping rents at an affordable level and also means that tenants have more choice when choosing a home.”

He adds: “A thriving market, where landlords can operate profitable lettings businesses, is crucial in encouraging investment in this stock and making more homes available for renters.”

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Tags: Highest Rental Yields Since 2018, HMO Rental Yields, HMOs, Landlord Investment Returns UK, Maximise Landlord Returns, Property investment, Rental market, Rental yields, UK Housing

Comments

Cider Drinker Read Full Bio

Member Since December 2023 - Comments: 1587

10:00 AM, 2nd May 2024, About 2 years ago

Gross yields are a pointless measure. Profit is the only worthy metric to gauge survivability.

We don’t even have rising house prices to DPS often the blow.

Rising interest rates, rising rental payment defaults, an incredibly unfair tax regime, rising costs for goods and services coupled with falling house prices.

What’s the point of rising gross yields? They just mean that rents are higher and house prices are lower.

Landlords haven’t been squeezed as much as this for at least two decades.

8 Report Comment Reply
The_Maluka Read Full Bio

Member Since May 2015 - Comments: 2203 - Articles: 2

10:22 AM, 2nd May 2024, About 2 years ago

Who are they kidding?

7 Report Comment Reply
Southern Boyuk

Member Since August 2023 - Comments: 94

12:08 PM, 2nd May 2024, About 2 years ago

What a silly and irrelevant article this is. Highest gross yields, highest mortgage costs, highest repair costs, highest number of problems with tenants, net profits Down.

8 Report Comment Reply
Fred Lawless

Member Since November 2017 - Comments: 9

3:35 PM, 2nd May 2024, About 2 years ago

Someone needs to point this yield figure out to surveyors/valuers and lenders. I recently had a surveyor value a property substantially less than the price I had agreed with a buyer. Working out the yield from his valuation it means he valued it at 10% yield. This is a property with 5 self contained contemporary flats that require no work and are in a good letting area in Liverpool. I actually asked the surveyor what yield figure they work on when they are valuing investment properties and he said it depends what the lender instructs. So clearly it seems to be the lender calling the shots here; Paragon on this occasion.

2 Report Comment Reply
Rob

Member Since April 2014 - Comments: 985 - Articles: 2

4:03 PM, 2nd May 2024, About 2 years ago

There are various ways used to calculate rent yields. I would like to see the math behind this!

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havens havens

Member Since April 2024 - Comments: 94

4:20 PM, 2nd May 2024, About 2 years ago

Since HMOs, provide for more profits via the data given above
I see more investors going in that direction
Coupled with the slow economic activities in 2024, this may be what most people could actually afford

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Cider Drinker Read Full Bio

Member Since December 2023 - Comments: 1587

9:23 PM, 2nd May 2024, About 2 years ago

Reply to the comment left by Rob Crawford at 02/05/2024 – 16:03Gross yield is usually house value divided by annual rent.
Increasing annual rent improves the yield and this is good news for landlords. Decreasing house value also improves the yield and this is bad new for landlords.

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Fed-up Landlord Read Full Bio

Member Since March 2024 - Comments: 27

10:55 AM, 3rd May 2024, About 2 years ago

Another totally meaningless article designed to paint us landlords as rolling in money.
The reality is exactly the opposite. In my case, I’m barely breaking even on several on my properties after taking into account mortgage payments, service charges, insurance, tax liability, normal repair costs etc.
It only takes a need to replace a cooker or washing machine and I’m plunged into the red for the year.
I’m selling up and retiring with the money earning fair interest in the bank, and nobody calling me with yet another problem.

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