Landlords’ buy-to-let (BTL) yields hit an average of 6.72% in September, continuing their strong performance since the summer of 2022 as market conditions improved.
Data from Paragon Bank showed that yields in September were up on both the 6.69% recorded in the previous month and the 6.48% registered in the previous year.
The yield – the proportion of rental income against the property value – at the end of the third quarter was based on the average BTL property value of £343,356 and rental income of £23,076.
Yields have strengthened since the summer of 2022 as house price inflation stabilised and rents increased due to constrained availability of rental stock.
HMO yields exceed 8%
More complex property types achieved the highest yields.
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Houses in multiple occupation (HMOs) continued to generate the highest yields at 8.34%, followed by freehold blocks at 6.66%.
Flats and terraced houses achieved yields of 6.02% and 5.94% respectively.
Regionally, landlords in the North of England (covering the North East and Cumbria) achieved the highest rental yields, at 8.02%, followed by Wales, which sat at 7.95%. Landlords in Greater London achieved the lowest yields, at 5.52%.
Russell Anderson (pictured), Paragon Bank Mortgages’ commercial director, said: “This data is based on offers, so you would expect yield performance to be even better on existing property in landlords’ portfolios, which would have benefitted from a longer period of both house price and rental value growth since acquisition.
“Yields are also only one part of the story; the landlord’s specific return on investment will be based on a number of factors, including how they have financed the property, capital gains and also any improvements they make.”
