Rental yields strengthen in England and Wales

The average rental yield in England and Wales stands at 7.4%, reflecting an annual rise of 0.3% compared to the same period last year and matches the previous quarter’s figure, one index reveals.

The data from Fleet Mortgages shows that nearly every region delivered positive annual growth, with only Yorkshire and Humber experiencing a minor fall of 0.4%, despite starting from a strong base.

On a quarterly basis, several areas saw slight yield reductions: the North East dropped by 0.1%, the South West by 0.2%, while both Wales and Yorkshire and Humber fell by 0.5%, and East Midlands dropped by 0.6%.

Despite its minor setback, the North East retains the highest average yield at 9.2%, followed by the North West at 8.4%. Yorkshire and Humber slipped to third place with 8.1%.

A positive for landlords

Fleet’s chief commercial officer, Steve Cox, said: “Rental yield levels are showing signs of stabilisation; however they are stabilising at a higher level due to the increases seen across most regions over the course of the last 12 months.

“That remains a real positive for landlords and much can be put down to the continued demand-supply imbalance, the fact rates have been moving downward, and affordability is easier to achieve across the board.

“We, of course, see regional variations across England and Wales, with a number of regions showing a dip in yields quarter-on-quarter, however, as mentioned, this has to be set against the context where yields have shown significant increases over the past 12-18 months.”

He added: “One of the interesting aspects of this barometer is the slight dip we saw in purchase applications through the last three-month period, down from 44% in Q4 2024 to 39% in Q1 this year.”

Rent yield gains

Significant quarterly gains in yield were recorded in the West Midlands, which surged by 1.1%, and East Anglia, which climbed 0.4%.

Fleet is suggesting that yield figures have begun to steady after substantial rises throughout 2024, predicting they will likely hover between 5% and 9% across all regions.

This stability is down to strong tenant demand outstripping available property stock, it says.

The report also highlights that Greater London commands the highest average monthly rent at £2,185, up 6.3% from the last quarter, with the South East following at £1,575.

Conversely, the North East offers the most budget-friendly rental options, averaging £739 monthly.

Landlords want to buy

Fleet’s index also reveals that 39% of applicants aim to expand their rental portfolios, down slightly from 44% in the previous quarter.

This dip may be down to the government’s stamp duty surcharge increase from 3% to 5%.

Fleet adds that the typical landlord portfolio now includes nine properties, with more than 55% of BTL mortgage applications coming from those managing four or more rentals.

Notably, first-time landlords have increased their presence, rising from 11% to 14% over the past three months.