Fleet Mortgage’s Q4 figures present a deviation from the trend observed in the previous two quarters, as three regions experienced a slight decline in average annual rental yields. After all, unprecedented tenant demand had pushed yields up for most of 2023.
While the average 6.9% figure signifies a robust rental yield, specific regions, such as Wales, the North West, Yorkshire and Humberside, have witnessed significant increases in rental yields. This likely reflects an ongoing scarcity of supply in comparison to the overall demand from tenants.
Looking ahead to 2024, there is an expectation that rents may experience a slight decline from their current highs. However, the imbalance between the number of potential tenants and the availability of properties should continue for the time being while many buyers wait for interest rates to lower before entering the market. We recommend reading the RWinvest best area to invest in property guide for 2024, or the best property investment fact sheet in order to learn more about this sector.
The challenges faced in 2023, particularly regarding landlords expanding their portfolios due to a substantial rise in mortgage rates, have eased in recent weeks. Mortgage lending has seen improvement. Lower rates and the ability to meet affordability criteria may make it easier for some investors to enter the property market this year.
According to Fleet’s analysis, higher landlord activity usually happens when mortgage rates hover around 5.0%. Given the current trajectory, it is plausible that more buying may occur if landlords can navigate current housing supply issues. We may also see more activity if the government announces favourable pre-election buy-to-let stamp duty regulations in the March Budget.
Overall, the beginning of the year has been more favourable than the challenges witnessed in the spring and summer of 2023. While a substantial boost in buy-to-let activity is not expected, there is a greater potential for such activity compared to most of the previous year.
Read More: Take a look at our guide on the pros and cons of buying a rental property for more buy-to-let advice.