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Average UK Buy-to-Let Yield Jumps to 5.8%

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    How Have Rental Yields and Income Changed Over the Past 2 Years?

    Rental yields are some of the most important figures to consider when looking at buy-to-let investment properties.

    The rental yield is the amount that an investor can reasonably earn through rental income expressed as a proportion of the property’s value. Calculating the rental yield on a property is one of the best ways of determining your return on a potential buy-to-let investment.

    According to specialist lender Octane Capital, the average rental yield in the UK has grown from 4.9% to 5.8% in the past two years.

    This is promising news for landlords, meaning, on average, they can get higher returns through rent compared to the value of the property.

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      Rental Yield

      How Has Rental Income Changed?

      Octane Capital’s research has found that rental income has increased by 19% over the last two years. The average total now stands at £15,144 a year.

      Initial costs for investing in a buy-to-let property have fallen on average by 17%. The average start-up cost is now £9952, down from £12,037 in 2021-22.

      However, the average operating cost has increased by 18%. According to this research, the leading cause behind this is likely rising mortgage rates.

      Jonathan Samuels, chief executive of Octane Capital, said: “The average landlord has benefited from a very healthy level of rental income growth in recent years, and so while the level of capital appreciation seen on their property may have cooled, both aspects of their investment are still bringing healthy returns despite the instability of the current market landscape.

      “Of course, higher running costs, most notably as a result of higher mortgage rates, have dampened the overall net return they’ve seen. But it’s fair to say that this reduction in net profits has been fairly marginal considering the current economic landscape and the storm of property market uncertainty that we’ve weathered in recent months.”

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      How Has Capital Gains Income Changed?

      Capital appreciation gains have been affected by the sluggish property market over the past two years, and capital appreciation has fallen by 6% per year to £15,728.

      Overall, this has brought returns for buy-to-let investors down 6% to £15,280 total per year in capital appreciation and rental income after subtracting the average ongoing costs associated with being a landlord.

      2023 was characterised as a challenging year for the UK property market, and this can be observed in the decreased capital appreciation gains that this study found in the past couple of years.

      However, 2024 has already displayed a solid start to the year, showing signs of recovery in the housing market. According to Savills’ latest Residential Market Forecast, mainstream capital value is predicted to return to healthy growth from 2026 onwards, with 17.9% growth projected by 2028.

      Find out more about the UK property market with our buy-to-let area guides:

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      Author

      Jessica Ferris

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      Jessica is a property content writer at RWinvest. Keeping a close eye on the UK property market, Jessica helps our readers stay informed and up to date on the latest market news and statistics.

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