Rental yields for landlords have reached their highest level in nearly a decade, according to Paragon’s latest PRS Trends Report. The data shows that landlords achieved an average rental yield of 6.3% in the second quarter of this year, marking the highest figure since 2014.
This milestone represents a significant recovery from the 15-year low of 5.2% recorded in the first half of 2023. The last time yields were this high was in the third quarter of 2014, with the previous peak of 6.7% occurring in 2012.
Richard Rowntree, Paragon Bank’s managing director for mortgages, hailed the surge as a positive sign for the lettings industry. “Rental yields are a key measure of the health of lettings businesses, so it’s fantastic to see them hit a 10-year high after rebounding from the low recorded around this time last year,” he said.
The report highlights a correlation between portfolio size and rental yields, with landlords owning 11 or more properties reporting higher average yields of 6.9%. Similarly, landlords who hold all of their properties in limited company structures also achieved yields of 6.9%.
Property type also played a significant role, particularly in the case of houses in multiple occupation (HMOs), where yields averaged 7.2%.
Rowntree noted the distinction between so-called “professional” landlords and the broader market. “We see that higher yields are reported by landlords with larger portfolios, especially those including HMOs and held within limited company structures. While I hesitate to label business owners as amateur or professional, the common thread is that these landlords are employing strategies that lead to success,” he said.
Rowntree added that despite recent challenges in the buy-to-let market, the report underscores the potential for landlords to thrive with the right approach. “There’s an opportunity for us, as an industry, to educate our customers and help them run successful businesses while making a vital contribution to the UK’s housing provision,” he concluded.