Landlords Enjoy Highest Rental Yields Since 2018

Landlords are experiencing a significant upturn in rental yields, reaching their peak in six years, averaging 6.1% in the first quarter of 2024. This marks the third consecutive quarter of increases and represents the highest level since the second quarter of 2018, when average yields stood at 6.6%, as per research conducted by Paragon Bank. The study, involving nearly 800 landlords, revealed that properties in multiple occupation (HMOs) yielded the highest returns, averaging 7%, compared to 5.8% for single self-contained properties.

Amid a challenging economic environment, landlords are seeking strategies to maximize returns while also mitigating the impact of increased tax burdens. Richard Rowntree, managing director of mortgages at Paragon Bank, noted that HMOs appeal to investors due to their strong demand for affordable housing, particularly in areas where tenants may struggle to afford whole properties. He attributed the growing yields partly to high levels of rental inflation and a stabilization in house prices.

Regional disparities are evident, with landlords in the North East enjoying the highest yields at 7%, followed by Yorkshire and the Humber at 6.6%. Conversely, London landlords witnessed lower returns, with outer London at 5.2% and central London at 5.7%, attributed to the capital's above-average property prices. While this surge in yields is advantageous for landlords, it poses challenges for tenants, emphasizing the importance of addressing the supply-demand imbalance to maintain affordable rents and offer more housing choices. Paragon Bank emphasizes the significance of a thriving market to encourage investment in rental stock and enhance availability for renters.

Source: Property118