Rental Yields Reach Decade High. What this Signals to Investors!

Research from a leading bank reveals that rental yields for landlords have reached their highest levels since 2014.

The latest trends report shows that landlords achieved an average rental yield of 6.3% in the second quarter of the year. This represents a significant recovery from the 15-year low of 5.2% recorded in the first half of 2023. The current yield level is the highest since the third quarter of 2014, with only the 6.7% yield in Q3 of 2012 being higher.

Indicator of Lettings Business Health

The managing director for mortgages at the bank commented how rental yields are a crucial indicator of the health of lettings businesses, so it’s excellent to see them reach a 10-year high after rebounding from last year’s low. We observe that higher yields are reported by landlords with larger portfolios, including Houses in Multiple Occupation (HMOs) and properties held in limited company structures. These attributes are often associated with professional landlords.

He further noted that while he preferred not to categorise business owners as amateur or professional, the key takeaway is that those who employ effective strategies tend to succeed. We often hear that buy-to-let is no longer viable for many landlords, but this data shows that with the right strategies, even the challenges of the past year can be managed. As an industry, we have the opportunity to educate our customers and help them run successful businesses while contributing to the UK’s housing supply.

Rental Yields: Insights from Nearly 800 Landlords

An in-depth analysis of the data, based on responses from nearly 800 landlords, reveals interesting trends. There is a clear correlation between portfolio size and yields, with landlords managing 11 or more properties reporting average yields of 6.9%. Additionally, landlords holding all properties within limited company structures also achieved yields of 6.9%. Property type also plays a role, with HMOs delivering yields of 7.2%.