Average rental yields achieved by landlords increased to their highest levelsince March 2011 during the fourth quarter of last year, data from buy-to-let mortgage specialist Paragon Bank has revealed.
Rental yields achieved by landlords reached at an average of 6.93% in December 2024, the highest level since February 2011 when the figure stood at 7.12%.
The figures, based on Paragon Bank’s mortgage offer data for buy-to-let purchase and remortgage, reveal that the high follows an increase from 6.72% at the end of the third quarter of 2024, and represents growth of 30bps rise since the same period in 2023.
This marks a continuation of increasing yields since midway through 2022, with houseprice inflation stabilising while rents continued to rise, fuelled by an imbalance between the supply of privately rented homes and tenant demand.
Analysing the data at a regional level highlights how the highest yields of 8.09% were achieved by landlords with properties in Wales. This was followed by the North West, where buy-to-let properties generated average yields of 7.84%, and the South West where landlords saw returns of 7.75%. Landlords with properties in Greater London achieved yields of 5.48%, making it the area with the lowest average rental yields.
Consistent with historical yield data, property types typically considered to be complex business often generated the strongest returns on buy-to-let investments. Houses in Multiple Occupation (HMOs) generated the highest yields of 8.40%, followed by freehold blocks at 7.28%, flats at 6.09% and terraced houses 6.05%.
Paragon Bank Mortgages Commercial Director Russell Anderson said: “A 13-year high in average rental yields is evidence of the market being in much better health than some would have you believe. Where landlords invest strategically, purchasing in areas where homes are relatively affordable and targeting more complex property types, buy-to-let delivers strong returns.
“A key component of this is demand, something that has outstripped the supply ofprivately rented homes for some time. This has caused market rents to rise which, in turn, has helped to sustain strong yields despite house price inflation.”
He added: “While yields are a good indicator of the regular income that landlords will typically see, to get a complete picture of the returns an investment property can generate, we must also take into account aspects such as how they are financed, capital gains, landlord deposit and any improvements that have been made. "
