It rebounds from a 15-year low recorded just last year
Rental yields for UK landlords have climbed to their highest level in nearly a decade, according to Paragon Bank’s latest PRS Trends Report.
The report revealed that average rental yields reached 6.3% in the second quarter of 2024, marking the highest average yield since the third quarter of 2014 and the first time yields have exceeded 6.3% since the third quarter of 2012, when they reached 6.7%.
The recent increase represents a recovery from the 15-year low of 5.2% recorded in the first and second quarters of 2023.
“Rental yields are a key measure of the health of lettings businesses, so it’s encouraging to see them hit a 10-year high after rebounding from the low recorded around this time last year,” said Richard Rowntree (pictured), managing director for mortgages at Paragon Bank.
Data compiled by Pegasus Insight, based on a survey of nearly 800 landlords, indicates variation in yields depending on portfolio size and property type.
Landlords with larger portfolios of 11 or more properties reported average yields of 6.9%, as did those holding all their properties within limited company structures. Owners of houses in multiple occupation (HMOs) saw even higher yields, averaging 7.2%.
Rowntree noted that these higher yields are often associated with landlords who take a more strategic approach to property investment.
“Compared to the wider market, higher yields are reported by landlords who have larger portfolios that include HMOs and are held in limited company structures,” he noted. “This suggests that those employing more professional strategies are achieving better outcomes.
“We hear a lot about how buy-to-let doesn’t stack up for many landlords, but this is evidence that with the correct strategies, the challenges of the past year or so can be overcome. As an industry, there’s an opportunity to educate our customers and help them run successful businesses while making a vital contribution to the UK’s housing provision.”
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