Buy-to-let landlords across the UK are reaping the rewards from higher rental yields, as tenant demand remains sky-high.
Landlords are enjoying a strong-performing buy-to-let market with rising rental yields. In the current climate, rental demand is continuing to swell and supply remains low. This means there is still a big opportunity for investors to boost their yields.
The current average rental yield for landlords in England and Wales reached a record high of 6.5% in Q1 2023, according to the latest quarterly rental barometer from Fleet Mortgages. With an annual and quarterly increase, this is up from last year’s 6.0% average in Q1 and is a small increase of 0.1% from Q4 2022.
Additionally, the average rental income per month increased to £1,345 in Q1. This is up from £1,200 a year ago. And gross rental income now exceeds £1,000 per month in seven out of the 10 regions Fleet Mortgages lend in. This can be compared to a year ago when this was the case for only five regions.
Steve Cox, chief commercial officer at Fleet Mortgages, says: “There is perhaps no surprise to see rental yield has increased in every single region in which Fleet lends in England and Wales, given a combination of factors including lower supply of property, increased tenant demand, house prices falling and product rates rising.
“Those regions which have topped the ‘charts’ for some time, continue to perform well but it is also positive to see all other regions showing stronger yields and again it is also not surprising to see rental incomes – on the whole – also on the increase.”
Rental yields breakdown by region
In the first quarter of the year, the highest average rental yields for buy-to-let landlords were found in the north east and Yorkshire and the Humber with an average rental yield of 8.8% and 7.7%, respectively.
Wales, the north west and West Midlands followed with average rental yields ranging from 6.7% to 7.6%. These top five regions are home to housing markets that have been performing particularly strongly alongside increases in tenant demand.
On the other hand, Greater London, East Anglia and the south east saw the lowest rental yields with averages of all three between 5.3% and 5.7%. This shows the north and Midlands are seeing much stronger rental yields on average than London and other parts of the south.
In recent years, buy-to-let landlords have increasingly been looking at the country’s regions for their next investment. This is alongside healthy yields and the prospect of greater capital appreciation over time.
The property investment landscape in many parts of the north of England and the Midlands continues to lure buy-to-let landlords, including those who have historically focused their efforts on the traditionally revered London market.
Professional and portfolio landlords continuing to purchase properties
Numerous uncertainties have affected many sectors recently, including economic issues. So, it isn’t surprising that some property investors had been sitting back to see what happens with the market.
The increase in buy-to-let mortgage rates in particular led to some landlords having a wait and see approach. But affordability has improved as there has been a rise in the number of products available. And loan sizes continue to increase from a low in Q3 2022.
While some landlords are selling, portfolio landlords are continuing to purchase buy-to-lets with a long-term investment horizon, says Cox, and he doesn’t see this tailing off anytime soon.
As rental yields remain strong across the UK and the buy-to-let sector continues to prove to be a reliable way to invest, more investors may leave behind the wait and see approach. Additionally, more investors targeting strong rental yields are likely to seek out investment opportunities across the north and Midlands.
BuyAssociation has access to property investment opportunities all over the UK, in some of the towns and cities with the highest yields in the country. Get in touch for more information.