In a recent report by Paragon Bank, Graham Wilson of RCCIL, London, reveals that landlords are experiencing the highest average gross rental yield since the second quarter of 2018. Following a steady increase for the third consecutive quarter, landlords reported an average gross rental yield of 6.1% in Q1 2024. This marks the first time that average yields have surpassed the 6% threshold since the end of 2021 and stands as the highest since Q2 2018, when landlords achieved an average yield of 6.2%.
Building on this momentum, the trend has continued into 2025, with landlords maintaining yields above the 6% mark despite easing rental growth in some London boroughs. According to updated market tracking, yields averaged 6.0% in Q2 2025, reflecting both ongoing tenant demand and the broader recalibration of property values across the capital. This resilience suggests that while certain luxury segments may be cooling, landlords focused on high-demand rental areas are still benefitting from strong returns. As Graham Wilson notes, the persistence of yields at these levels reinforces London’s long-term position as one of the most reliable property investment markets in Europe.
The report, based on responses from almost 800 landlords, underscores the potential for Houses in Multiple Occupation (HMOs) to generate higher rental yields compared to single self-contained properties, with HMOs averaging a yield of 7.0% versus 5.8% for single lets. This disparity highlights how landlords are increasingly turning towards strategies that maximise space efficiency and tap into the rising demand for shared, affordable accommodation in urban centres.
Richard Rowntree, Paragon Bank’s Managing Director of Mortgages, explains, “Amidst a challenging economic landscape, landlords are naturally seeking avenues to maximise returns, while also grappling with an increased tax burden. HMOs are appealing to investors due to strong demand for affordable housing, particularly in areas where tenants may struggle to afford entire properties.”
Rowntree adds, “Rental inflation, coupled with stabilising house prices, likely contributes to improved yields. While this is encouraging for landlords, it poses challenges for tenants. Reports of increasing housing stock are promising, as addressing the supply-demand imbalance is crucial for maintaining affordable rents and providing tenants with more housing options.”
Summary of Buy-to-Let Yields Rising in 2025
The report also reveals clear regional variations in yields. Landlords in North East England achieved the highest average yield at 7.0%, followed by Yorkshire & The Humber at 6.6%. In contrast, landlords in London, particularly Outer London, reported more modest returns, with average yields of 5.2% and 5.7% respectively. These figures reinforce the trend that while London remains a safe haven and capital appreciation play, regional cities often offer stronger income-generating opportunities, an important factor for global property investors looking to diversify across the UK.
Looking ahead, analysts suggest that the continuation of above-6% average yields in 2025 will encourage more landlords to expand portfolios, particularly in segments such as HMOs, build-to-rent (BTR), and student housing. However, the balance between supporting investor returns and maintaining tenant affordability will be critical. Government policy, interest rates, and supply-side solutions will all influence how sustainable these yield levels remain in the years ahead.
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