Overall rental yields for landlords in the UK are holding their own despite difficult times. But one location in particular is still the top place for buy-to-let returns…
Buy-to-let rental yields vary widely across the UK, and recent events have done little to affect this. While there is more to any property investment than just the monthly returns, prospective landlords hunting for the best yields seem to consistently find them in the north-west of England.
According to the latest Buy-to-let Rental Barometer from Fleet Mortgages, the north-west remains the top spot for yields overall. In the region, landlords can expect to achieve returns of around 7.6% through monthly rent. This is an increase of 0.6% for quarter two of 2020, up from 7% in Q2 2019.
The north-west was one of just three areas to have seen yields climb between April and June compared to the previous year. The others were the West Midlands with a 0.9% rise to 7%, and the south-east with a 0.6% rise to 5.5%.
Buy-to-let picture for England
Monthly rental returns across England as a whole dipped slightly by 0.3% in Q2 2020 year-on-year. While this appears to show the negative effects of the coronavirus pandemic, the figures are pulled down by the East Midlands. There, average yields fell by a huge -2.1% in comparison to last year, down to 4.4%.
Yorkshire and the Humber registered the second biggest fall, losing -1.7% down to 5.5%. However, with the average across all regions equating to 5.3% rental yields, the area is still performing above average.
While the East Midlands, as of the past three months, has the lowest average yields in England, London follows closely behind. In Greater London, average returns came in at 4.6%, which is a drop of -0.4%.
The London property market, though, is certainly a mixed bag for landlords. While average yields may not be the highest, some areas see investors making significant gains through capital appreciation. Like any part of the market, specific location and property choice make a big difference when looking to invest in the capital.
More data is needed
As the lockdown continues to ease and the economy begins its climb to recovery, much is still unknown about the short-term future. Life is yet to return to normal, and the impact will be felt for some time as confidence may take time to return to previous levels.
However, many experts use the past to predict the future. Fleet Mortgages also believes that the way the housing market has performed through downturns in the past is a good sign of how recovery might look. The rental market in particular tends to feel the effects less than sales.
Steve Cox, distribution director of Fleet Mortgages, said: “The economic backdrop may appear somewhat bleak at present, but this might change quickly depending on the type of recovery we get, and certainly at the moment our latest figures do not suggest sharp falls in rental yield.”
He believes pent-up demand is one thing boosting the sector right now. However, he adds that more data is required to see the full picture. “It will be interesting to see whether this trend will be maintained into the rest of the year,” he adds.
“What we do know, as a result of our experience through the credit crunch and the recession that followed, is rents are not as susceptible to these economic hits as property prices. Occupants are much more likely to opt for shorter-term financial commitments offered by renting in such circumstances, rather than move to longer-term property ownership.”
