Yields for landlords have continued their upward trend into Q3 2024, hitting an average of 6.72% according to Paragon data.
- The steady rise follows a trend seen since mid-2022, with stabilised house price inflation and increasing rents.
- Regional variations show landlords in the North and Wales achieving the highest returns, while Greater London yields remain the lowest.
- Different property types reveal diverse yield performances, with houses in multiple occupation leading the pack.
- This data also suggests potential higher returns on long-term portfolio properties benefiting from accrued growth.
Paragon Bank’s data for the third quarter of 2024 indicates a continued uptrend in buy-to-let yields, reaching an average of 6.72% by September. This represents a slight increase from the 6.69% witnessed in the preceding quarter and a significant improvement from 6.48% the previous year. This rise in yields is largely attributed to stabilised house price inflation and escalating rents driven by limited rental stock, a trend that has persisted since mid-2022.
Different property types deliver varying levels of rental yields, with houses in multiple occupation topping the list at 8.34%, followed by freehold blocks with yields of 6.66%. Meanwhile, flats and terraced houses yield 6.02% and 5.94% respectively. These figures reflect the complexity and diversity in the rental market, offering insights for landlords on potential investment opportunities.
Regionally, landlords in the North of England benefit from the highest yields at 8.02%, closely followed by those in Wales at 7.95%. In contrast, yields in Greater London lag behind at 5.52%, showcasing regional disparities in rental property performance across the UK.
Russell Anderson, commercial director at Paragon Bank Mortgages, emphasised that while higher yields are often seen in more complex buy-to-let arrangements, even basic property types can achieve strong returns. He noted, “Yield performance has been improving over the past 18 months as house price inflation moderated, but the strong demand for rental property drove rental prices higher.”
This data reflects only the offers, suggesting that existing property portfolios could exhibit even more robust performance due to extended periods of growth in both house values and rental income. In considering overall returns, landlords must also assess factors like financing methods, capital gains, and property improvements.
The rising yields indicate a favourable trend for landlords, promising sustained growth in the buy-to-let market.
