According to research from Pegasus Insight, regionally, landlords in the North West, North East and East Midlands had the strongest returns at around 7%.
This compares to London, which had the lowest rental yields of 6.1%.
The report added that 87% of landlords surveyed said they were making a profit, with 21% saying they were seeing a large profit and 66% recording a small profit.
Only 5% reported any form of loss, which Pegasus Insight said showed the “resilience of buy-to-let economics, even as landlords continue to face regulatory and tax headwinds”.
One such example is the Renters’ Rights Bill, which is expected to receive royal assent and become law at the end of September.
Mind the affordability gap
Sponsored by Newcastle for Intermediaries
Changes such as the abolition of Section 21 evictions, the move to open-ended tenancies, annual rent increase limits and new rights for tenants around pets and advance rent could be implemented by the start of next year.
Only 14% of landlords said they are fully aware of the details of the Renters’ Right Bill and the firm said the “uncertainty is likely to influence portfolio strategies in the months ahead”.
Bethan Cooke, director at Pegasus Insight, said: “Yields at a 10-year high are a clear signal of the enduring strength of the private rented sector. Despite the significant challenges landlords have faced over recent years – from higher borrowing costs to shifting tax rules – the fundamentals of tenant demand and income generation remain robust. The fact that almost nine in 10 landlords are still making a profit demonstrates the sector’s ability to weather economic and policy storms.”
“At the same time, the policy landscape is far from settled. The Renters’ Rights Bill represents the most significant set of changes in a generation, and while intended to protect tenants, it is also adding to landlord uncertainty. Our data shows landlords remain committed, but for many the coming 12 months will be a crucial period to review portfolios, financing and business models in light of what’s ahead.”
