Landlords reported average rental yields of 6.3% in the second quarter of the year, according to Paragon, which has published its latest PRS Trends Report.
The report noted that average rental yields haven’t hit 6.3% since the third quarter of 2014 and haven’t passed the current level since 2012 (when they reached 6.7%).
Steady recovery
Paragon said that the current high marks a recovery in yields, “which have climbed steadily from the 15-year low of 5.2% recorded in the first and second quarter of 2023”.
Richard Rowntree, managing director for mortgages at Paragon Bank, said: “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.”
Portfolio size matters
The report revealed a correlation between portfolio size and yields, with higher average yields of 6.9% reported by landlords with larger portfolios of 11 or more properties.
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Yields of 6.9% were also generated by landlords who hold all of their properties in limited company structures.
Landlords with houses in multiple occupation (HMOs) reported even higher yields of 7.2%.
Rowntree added: “We see that, compared to the wider market, higher yields are reported by landlords who have larger portfolios that include HMOs and are held in limited company structures.
“Each of these attributes is a hallmark of what can be considered professional landlords.
“We hear lots about how buy to let doesn’t stack up for many landlords, but this is evidence that with the correct strategies, even the challenges of the past year or so can be overcome.”
This article was first published on YourMoney.com‘s sister site, Your Mortgage. Read: Good news for landlords as rental yields reach 10-year high
