Rental yields rise across England and Wales for third consecutive quarter

Rental yields in the buy to let sector have continued to grow across England and Wales, according to the latest Fleet Mortgages Barometer.

The report, which covers the third quarter of 2023, shows that the average yield for both countries has risen by 1% to 6.9% compared to the same period in 2022.

This is also a 0.6% increase from the second quarter of this year.

The data comes from the specialist lender’s own activity, as well as market trends and regional variations.

‘The buy to let and private rental sector’

Fleet’s chief commercial officer, Steve Cox, said: “Many of the themes that have been evident in the buy to let and private rental sector throughout 2023 continue to strengthen, particularly when it comes to demand for purchase versus remortgage activity, meeting affordability challenges, tenant demand, property supply, and the overall impact on yields and rents.

“Unsurprisingly, when you add of all 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.”

Rental yields have increased in every region

Fleet also reveals that rental yields have increased in every region on an annual basis, with the biggest jumps seen in the West Midlands, East Anglia and the South East.

On a quarterly basis, only the North West and Wales saw a slight decline in yields, while all other regions posted positive changes.

The report attributes the growth in rental yields to several factors, such as high demand from tenants, low supply of available properties, and a dip in house prices.

These conditions have also resulted in higher rents in most regions, with the exception of the North East, North West, and Yorkshire & Humberside.

Shortage of stock is leading to higher rental prices

Mr Cox said: “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 look for opportunities to purchase more property, those with a smaller private rental sector investment are finding it difficult to make the numbers work.”

The North East of England remains the top performer in terms of rental yield, with an impressive 9.1% figure for the thirteenth consecutive quarter.

However, East Anglia and the West Midlands have seen the largest percentage increase, up by 1.3% on the same quarter last year.

The number of investment properties owned by landlord borrowers, Fleet says, has remained stable at 12.

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