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Rental yields rise to record high – Fleet Mortgages

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  • 24/04/2023
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Rental yields rise to record high – Fleet Mortgages
Rental yields across most regions in England and Wales have risen annually with many areas seeing increases of around 0.5 per cent.

The Fleet Mortgages Buy-to-Let Rental Barometer for Q1 showed that in England and Wales, rental yields rose from six per cent last year to 6.5 per cent now. This is also up from the 6.4 per cent average in Q4 2022, and the highest on record for the Barometer. 

The specialist buy-to-let lender put this rise down to a short supply of rental stock, high tenant demand, and the easing of house prices. 

All regions recorded an annual and quarterly rise in rental yield, except for the North West and South West where quarterly declines of 0.1 per cent and 0.2 per cent were seen. 

An annual rise of 0.6 per cent was recorded in the East Midlands, South East, East Anglia and Greater London. This put rental yields at 6.5 per cent in the East Midlands, 5.7 per cent in both the South East and East Anglia, and 5.3 per cent in Greater London. 

Greater London had the lowest rental yield compared to other recorded regions. 

The North East offers buy-to-let landlords the strongest yield at 8.8 per cent, with an annual increase of 0.4 per cent. Wales reported the highest yearly growth at 1.1 per cent, with an average rental yield at 7.6 per cent in Q1. 

The average rental income across all regions came to £1,345 per month, up from £1,256 in Q4 2022. This was a rise of £135 since Q1 last year.  

Despite rental yields being the highest in the North East, average rents have actually fallen by £681 on a quarterly basis. Declines in average rents were also recorded in the East Midlands and the South East.  

Gross rental income is higher than £1,000 in seven out of the 10 recorded regions, up from the same time last year when this was true for five out of 10 regions. 

 

Better for portfolio landlords 

Steve Cox (pictured), chief commercial officer at Fleet Mortgages, said: “There is perhaps no surprise to see rental yield has increased in every single region in which Fleet lends in England and Wales over the last year, given a combination of factors including lower supply of property, increased tenant demand, house prices falling and product rates rising. 

“Those regions which have topped the ‘charts’ for some time, continue to perform well but it is also positive to see all other regions showing stronger yields and again it is also not surprising to see rental incomes – on the whole – also on the increase.” 

He added: “Overall, the market continues to predominantly be the preserve of portfolio landlords, particularly as those with only one or two properties struggle to stay profitable given the rise in mortgage costs.  

“Purchase activity has slipped slightly but is still over a third of our business and this is coming from portfolio players continuing to purchase residential property with a long-term investment horizon. We do not see that tailing off any time soon.” 

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