Average Gross Rental Yields Hit Six-Year High According to New Data

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Paragon Bank Study Reveals Average Rental Yield is Now 6.1%

A study undertaken on behalf of Paragon Bank has declared that the average gross rental yield for UK landlords has hit the highest level since the second quarter of 2018.

The average rental yield registered as 6.1% in Q1 2024. This is the third successive quarterly increase and the first time the average yield has exceeded 6% since the end of 2021. In Q2 2018, landlords achieved an average of 6.2%, making the current figure the highest average yield since then.

The survey asked 771 landlords in March 2024 about their current gross rental yield. The research also highlighted regional differences in the yields achieved by buy-to-let landlords.

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Which Regions Offer the Highest Average Yields?

When it comes to buy-to-let investment, the North of England has been outperforming the South of England in various metrics. This includes rental yields, and Paragon Bank’s research cements this trend further.

Northern regions occupy the top of the table for average gross rental yields in this survey. The North East (7%), Yorkshire and the Humber (6.6%), and the North West (6.3%) all show high potential yields for landlords.

Central London (5.7%) and Wales (5.6%) showed modest returns, and Outer London came in dead last with a 5.2% average yield. According to Natwest, although these regions had the lowest rental yields in this study, anything over 5% could be considered a ‘good’ rental yield, suggesting that overall yields are currently high in the UK. However, with potentially much higher yields in the North, London real estate investment has lost some of its draws in recent years.

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What Does This Mean for the Buy-to-Let Market?

Looking at this new data, is now the time to invest? Record levels of rental inflation in recent years have bolstered average rental yields and helped landlords to alleviate some of the financial pressures felt from high mortgage rates and an increased tax burden.

Richard Rowntree, Paragon Bank Managing Director of Mortgages, said: “While strong yields are good news for landlords, we recognise that this rental inflation poses a very real challenge for tenants so are buoyed by reports of improving levels of housing stock in the sector. This is because addressing the imbalance between supply and demand is central to keeping rents at an affordable level and also means that tenants have more choices when choosing a home. A thriving market, where landlords can operate profitable lettings businesses, is crucial in encouraging investment in this stock and making more homes available for renters.”

Learn more about UK property investors with our buy-to-let area guides, covering topics such as available investment property in Croydon and available investment property in Bournemouth.

Average Gross Rental Yields Hit Six-Year High According to New Data