UK Property Investment Rental Yields Reach New Levels

In a positive turn for property investors, the latest data from Paragon Bank reveals that the average gross rental yield reported by landlords in the UK has surged to its highest level since the second quarter of 2018.

For the third consecutive quarter, average gross rental yields have climbed, reaching an impressive 6.1% in the first quarter of 2024. This marks the first time in over two years that yields have surpassed the 6% mark, showcasing a promising trend for property investors.

The survey, which gathered insights from nearly 800 landlords, shed light on the significant potential of Houses in Multiple Occupation (HMOs) to generate higher rental yields compared to single self-contained properties. On average, HMOs boasted a yield of 7.0%, outperforming single self-contained properties which averaged at 5.8%.

Richard Rowntree, Managing Director of Mortgages at Paragon Bank, attributes this surge in yields to landlords' efforts to maximize returns amidst a challenging economic climate. He highlights the appeal of HMOs to investors, particularly due to strong demand for affordable housing, especially in areas where tenants may struggle to afford whole properties.

Rowntree further notes that the current high levels of rental inflation, coupled with stabilized house prices, have contributed to the improvement in yields. While this is positive news for landlords, he acknowledges the challenges it poses for tenants and emphasizes the importance of addressing the imbalance between supply and demand in the housing market.

Regional variations in rental yields were also evident in the study. Landlords in North East England reported the highest average yields of 7.0%, followed closely by those in Yorkshire & The Humber at 6.6%. In contrast, landlords in Outer London recorded more modest returns, with average yields of 5.2%, reflecting the influence of significantly higher property prices in the capital.

Amidst these findings, the study underscores the importance of a thriving rental market in encouraging investment and making more homes available for renters. As landlords continue to navigate market dynamics, the outlook for property investment in the UK remains optimistic, offering promising opportunities for investors seeking stable returns.

With rental yields reaching their highest levels in nearly four years, the UK property market presents an attractive proposition for investors looking to capitalize on the strength and resilience of the rental sector.

Region Average yield (%)