Buy to Let Yields appear to be rising in 2024

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%.

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 properties.

Richard Rowntree, Paragon Bank’s Managing Director of Mortgages, explains, “Amidst a challenging economic landscape, landlords are naturally seeking avenues to maximize 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 stabilizing 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.”

The report also reveals regional variations in yields, with North East England boasting the highest average yield at 7.0%, followed by Yorkshire & The Humber at 6.6%. In contrast, landlords in London, particularly in Outer London, reported more modest returns, with average yields of 5.2% and 5.7% respectively. Learn more about the future landscape of the London property market with our report.

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Categories: Property News