Paragon used independent research from The Landlords Panel from BDRC Continental and found that students generated an average yield of 6.45%, whilst young singles generate 6.22%.
Retired people are also high up the table (6.16%), followed by white collar/professional workers and executive or company lets (both 6.13%). At the other end of the scale, non-housing allowance benefit claimants generate the lowest yields at 5.78%, followed by young couples and manual workers (5.94%).
The average yield across the market currently stands at 6.2%.
Nigel Terrington, Paragon Group chief executive, said: “Yields are an important component of a landlord’s overall business plan because they give a good indication of the income that the property generates. Of course, returns for many landlords will often be higher than stated yields as these are calculated at the current rental income against the property’s value today, not taking into account capital appreciation since the landlord purchased the property or their loan-to-value.”
Terrington added: “Student yields typically outperform the wider market because they are let on a per room basis, which can generate higher rental income. On the downside, they tend to require a higher degree of maintenance, so landlords have to factor that cost into their overall business models.”
Elsewhere, the research shows that the number of properties in a landlord’s portfolio has little bearing on its overall yield. For example, landlords with one property generated the same average yield as those with over 20 properties (6.2%), whilst those with between two and four properties in a portfolio generated a yield of 6.5%.
However, there was clear contrast at a regional level, with yields in the West Midlands outstripping the rest of the UK at 6.5%. These were followed closely by Yorkshire & Humber (6.4%) and the North East (6.2%). Central London lagged in the yield stakes (5.5%) due to the high cost of property in this part of the UK.
