The recent rise represents a recovery from the 15-year low of 5.2% logged in the first and second quarters of 2023
Rental yields for UK landlords have jumped to their highest level in almost a decade, according to Paragon Bank’s latest PRS Trends Report.
The report found 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 surpassed 6.3% since the third quarter of 2012, when they hit 6.7%.
The recent rise represents a recovery from the 15-year low of 5.2% logged in the first and second quarters of 2023.
Rental yields are a key measure of the health of lettings businesses, so it is encouraging to see them reach a 10-year high after bouncing back from the low recorded around this time last year, according to Richard Rowntree, MD for mortgages at Paragon Bank.
Data compiled by Pegasus Insight, based on a survey of around 800 landlords, suggests 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 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 houses in multiple occupations and are held in limited company structures, he said. This suggests that those employing more professional strategies are achieving better outcomes.
We hear a lot about how BTL does not 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 is an opportunity to educate our customers and help them run successful businesses while making a vital contribution to the UK’s housing provision, he added.
