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 offer data - show 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 is a trend that has continued since midway through 2022, with house price inflation stabilising while rents continued to rise, fuelled by an imbalance between the supply of privately rented homes and tenant demand.
Region by region, the highest yields of 8.09% were achieved by landlords with properties in Wales, followed by the North West with 7.84%, and the South West with 7.75%. Landlords with properties in Greater London achieved lower yields of 5.48%. By property type, 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 of privately 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.”
“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. "
