Yields came in at 6.2 per cent in the final quarter of 2022, up from 5.9 per cent in the same period a year earlier, Fleet Mortgages found.
Landlord returns in all regions in England and Wales bar the North East and West Midlands edged up.
The strongest increase was in Greater London where yields rose from 4.5 per cent to 5.2 per cent year on year.
Despite the annual dip, the North East of England has strongest yields overall coming in at 8 per cent, slightly down on last year’s 8.2 per cent.
Fleet said a continued shortage of private rental sector (PRS) supply, set against the backdrop of significant tenant demand, was driving rents higher.
However, with landlords having to factor in higher mortgage costs, yields could fall back slightly over the coming months.
Fleet: ‘Significant increase in rental yields’
Steve Cox, chief commercial officer at Fleet Mortgages (pictured), said: “For the first time in well over a year we can see the vast majority of regions in England and Wales returning a significant annual and quarterly increase in rental yield levels, set against the backdrop of a PRS which is woefully short of the supply required to meet tenant demand.
“Yields are strong right across the board with those in the North continuing to lead the way, while we have even seen increases in Greater London, which has tended to move in the other direction in the last few years.
“This will be positive news for landlords, and we hope will give renewed confidence to them that – should they be able to make the numbers work – there is a well of tenant demand to be accessed and yields to be achieved.”
