According to the Fleet Mortgages Q2 rental barometer, which covers rental yield in England and Wales, overall rental yields have dropped from 6.1 per cent in the same period last year to 5.5 per cent now.
Rental yields are also down 0.3 per cent on the previous three-month period when the overall yield was 5.7 per cent.
The largest decrease was recorded in East Anglia, where rental yields fell 0.9 per cent year-on-year to 4.7 per cent.
This was followed by the North West which contracted by 0.6 per cent annually to 6.7 per cent and then Wales which fell 0.5 per cent to 6.6 per cent.
The smallest decrease was seen in the North East and South West where rental yields fell by 0.1 per cent year-on-year to 8.3 per cent and 5.7 per cent respectively.
The report said whilst there has been a slight fall strong tenant demand couple with low supply would likely keep yields at “good levels across most regions”.
Steve Cox (pictured), chief commercial officer at Fleet Mortgages, said the report showed that while there had been a drop-off since the highs of last year, yields were “holding up well” and there has been “consistency” across most regions on a quarterly basis.
He explained: “That clearly has much to do with strong tenant demand, married up with relatively low levels of supply. Properties are highly sought after, and rents are strong due to the scarcity value of quality homes. Our anticipation is that, in most regions of the UK, yields will stay pretty constant especially while this supply-demand imbalance is in place.”
Cox continued to say many landlords wanted to remortgage to fund new purchases, but the increase in pricing and a lack of supply were potential hurdles.
He said the lender expected to see “strong levels of remortgaging” throughout the rest of the year and as lenders get on top of service levels there would be a return of stability and pricing, but this may not kick in until early next year.
“There may also be an element of landlords holding off any purchase ambitions as they await to see how house prices in the UK react to the double-whammy of the cost of living increases and more expensive mortgages. A number of economists anticipate this will see house prices dropping off their highs, which might present a better opportunity for acquisitive landlords,” he added.
“Overall, for existing landlords, the rental yield figures remain a strong source of comfort, and while we believe the level of demand for PRS properties will dip, there is likely to still be enough – especially compared to property choice – to ensure they maintain good levels throughout the rest of 2022.”
