Landlords across the UK are experiencing the highest rental yields seen in the past ten years, according to the latest findings from Paragon’s PRS Trends Report. This significant uptick in profitability is good news for property investors, marking a robust recovery in the rental sector.
A Decade of Growth
The research highlights a notable increase to an average rental yield of 6.3% in the second quarter of this year, a peak not observed since the third quarter of 2014. This figure even surpasses the yield from the third quarter of 2012, which stood at 6.7%. These figures indicate a marked recovery, especially considering the yield had plummeted to a 15-year low of 5.2% during the same period last year.
Analysis of Data
Delving deeper into the data, which was gathered through a survey of nearly 800 landlords by Pegasus Insight, a clear pattern emerges: larger property portfolios correlate with higher yields. Landlords managing more than 11 properties reported an average yield of 6.9%, mirroring the yield from properties held within limited company structures.
Notably, houses in multiple occupation (HMOs) showed even stronger performance, with owners reporting yields of 7.2%. This data underscores the benefits of scale and structure in maximising rental returns.
Expert Insights
Richard Rowntree, Managing Director for Mortgages at Paragon Bank, shared his perspective on the findings: “It’s extremely encouraging to see rental yields reach a 10-year high, a clear indicator of the health and potential profitability within the lettings market.” He further explained that the data reflects particularly successful strategies employed by landlords who invest in larger portfolios and operate under limited company structures, often considered more professional in their approach.
Rowntree concluded, “Despite recent challenges, these results show that well-strategised buy-to-let investments continue to offer substantial returns. It highlights an opportunity within the industry to educate and support landlords in enhancing their operations and contributing positively to the UK’s housing needs.”
This resurgence in rental yields comes at a crucial time, offering a positive outlook for landlords and reinforcing the rental market’s role in the broader housing economy.
