Rental yields in the buy-to-let sector across England and Wales have demonstrated robust growth in the third quarter of 2023, as indicated in the latest Fleet Mortgages Barometer report. This comprehensive report, covering the buy-to-let landscape, unveils promising statistics revealing an upward trajectory in average rental yields for both regions, marking a 1% increase from the same period in 2022, reaching a commendable 6.9%. Moreover, this growth represents a 0.6% rise compared to the second quarter of the current year.
The data presented in this insightful report is derived from Fleet Mortgages’ own lending activities and encompasses pertinent market trends and regional variations, providing a comprehensive snapshot of the current state of the buy-to-let and private rental sector in England and Wales.
Fleet Mortgage’s Chief Commercial Officer, Steve Cox, emphasized the significant trends shaping the buy-to-let and private rental sector in 2023. He highlighted the escalating demand for property purchases versus remortgages, the ongoing struggle with affordability challenges, tenant demand dynamics, property supply, and the consequential impact on rental yields and rents.
Mr. Cox commented, “Unsurprisingly, when you add all of this together, we find annual rental yields having grown in every single region compared to last year, and this has resulted in a significant 1% increase in yield for England and Wales as a whole.”
He added, “With house prices having dipped across the country, the yield figures are strengthening, while property availability compared to tenant demand is pushing monthly rents up in the vast majority of regions, although the Northern regions have seen a dip this month.”
According to the Fleet Mortgages Barometer, rental yields have increased on an annual basis in every region, with the most substantial gains noted in the West Midlands, East Anglia, and the South East.
On a quarterly basis, only the North West and Wales reported a slight decline in yields, while all other regions experienced positive changes. The report attributes the surge in rental yields to several factors, including high tenant demand, limited property availability, and a decrease in house prices. These conditions have also translated into higher rents in most regions, with the exception of the North East, North West, and Yorkshire & Humberside.
Steve Cox further explained, “The outlook, at least for the short-term, looks likely to be very similar, particularly in regions like Greater London, the South West, and the South East where a shortage of stock is inevitably leading to higher rental prices. While portfolio landlords, in particular, continue to seek opportunities to acquire more property, those with smaller investments in the private rental sector are finding it increasingly challenging to make the numbers work.”
The North East of England continues to stand out as the top performer in terms of rental yield, maintaining an impressive 9.1% figure for the thirteenth consecutive quarter. However, East Anglia and the West Midlands have experienced the most significant percentage increase, rising by 1.3% in comparison to the same quarter last year.
Fleet Mortgages concludes that the number of investment properties owned by landlord borrowers remains stable at 12, signifying a consistent landscape for investors in the buy-to-let sector.
As rental yields continue to demonstrate growth across England and Wales, the buy-to-let sector appears to offer promising prospects for investors and property owners. The remarkable performance in the rental market is attributed to various factors, including increasing tenant demand, limited property supply, and favourable economic conditions. However, regional disparities and the evolving property market dynamics require investors to adapt to a changing landscape.