The average rental yields achieved by landlords increased to their highest level since March 2011 during Q4 2024, Paragon Bank reveals.
Rental yields achieved by landlords reached an average of 6.93% in December 2024.
The figures reveal that the high follows an increase from 6.72% at the end of Q3 2024 and represents an increase of 30 basis points since the same period in 2023.
Paragon suggests that this marks a continuation of increasing yields since midway through 2022, with house price inflation stabilising while rents continue to rise, fuelled by an imbalance between the supply of privately rented homes and tenant demand.
On a regional basis, the highest yields of 8.09% were achieved by landlords with properties in Wales. The North West followed where buy-to-let (BTL) properties generated yields of 7.84% and the South West where landlords saw returns of 7.75%.
Greater London landlords achieved the lowest average rental yields of 5.48%.
Property types considered to be complex business often generated the strongest returns on BTL investments.
Houses in multiple occupations generated the highest yields of 8.40%, followed by freehold blocks at 7.28%, flats at 6.09% and terraced houses at 6.05%.
Paragon Bank commercial director of mortgages Russell Anderson says: “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.”
