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Rental market

Average rental yields hit 6% during Q1 says leading buy-to-let lender

Paragon says yields have been climbing for several quarters now and are highest in the SW of England.

Nigel Lewis

to let signboard rental yields

Average rental yields hit 6% in the first quarter of 2021, the highest recorded in three years.

Paragon Bank says that rental yields have climbed by 0.2 percentage points from 5.8% in Q4 2020 and have seen a year-on-year increase of 0.7 percentage points from Q1 2020 when landlords were generating average yields of 5.3%.

Its survey of 900 landlords shows that investors’ ability to generate income depends on where their properties are located; those with lettings businesses in the South West (6.7%) and North East (6.6%) are netting the highest average rental yields, while landlords in Central London continue to achieve the lowest yields of 5.4%, due to higher average property prices in the capital.

There is also a correlation between typical yields and portfolio size. Single property landlords recorded average yields of 5.7%, while landlords who operate portfolios of 20 or more properties reported an ability to generate average yields of 7.1%.

Portfolio

Its research took rental income into account as well as any mortgage, maintenance and other costs associated with running their letting portfolio.

Paragon’s mortgages MD Richard Rowntree (pictured) says: “Rental yields are a key measure for landlords so it’s encouraging to see them indicate being able to generate average yields of 6%.

“The fact that this is a three-year high and is being reported alongside continued high levels of tenant demand suggests that the private rented sector has bounced back well from the Covid-19 pandemic and is actually stronger as a result of providing stable homes for tenants during the challenges of the past year or so.”

May 4, 2021

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