Buy to let properties are delivering their highest average rental yields
since February 2011, according to fresh data from Paragon Bank.
The figures, drawn from the bank’s lending records, show that landlords
achieved an average yield of 7.11% in April, edging close to the 7.12%
recorded 14 years ago.
This marks a significant jump from the 6.94% seen at the close of 2024,
which was a 13-year high.
The surge comes amid a backdrop of steady rent increases fuelled by robust
tenant demand and a persistent shortage of rental homes.
Yields continue to increase
The bank’s commercial director of mortgages, Russell Anderson, said: “Our
latest lending data highlights how average rental yields have continued to
increase from the 13-year high we revealed at the end of last year.
“While the most recent economic instability caused by the threat of Trump’s
tariffs is understandably impacting business confidence across many
sectors, these figures offer tangible evidence that buy to let continues to
offer strong returns for investors.”
He added: “This is particularly true where landlords employ a strategy of
targeting properties that offer higher returns,
HMOs being the most obvious example, or investing in areas where property
is relatively more affordable but benefits from the strong tenant demand we
see all over the UK.”
Best yields in Wales
Paragon’s data on
buy to let purchases
and remortgages indicates a 40-basis point rise in yields compared to last
year, driven by moderating house price growth.
Since hitting a low of 4.91% in May 2017, yields have followed a consistent
upward trajectory.
Regionally, Wales leads the pack with an impressive average yield of 8.43%
in April, up from 8.09% in December 2024.
Yorkshire and Humberside and the North follow closely, offering 7.97% and
7.94%, respectively.
Greater London, despite a 30-basis point uptick to 5.78%, remains the
region with the lowest returns.
Among property types, Houses in Multiple Occupation (HMOs) stand out,
delivering yields of 8.50%, a slight increase from 8.41% late last year.
Landlords are heading north
News of yields hitting a 14-year high comes as Hamptons reveals that the
best returns are to be found in the north of England.
It says that in the first four months of 2025, a record 39% of BTL
purchases occurred in the north of England or the Midlands, a sharp rise
from 24% in 2007 and 34% in 2022, when interest rates began to climb.
In contrast, the south of England is losing appeal due to its pricier
properties and lower rental returns.
Despite a nationwide uptick in yields, Hamptons says that investors are
prioritising regions with stronger profitability to offset rising mortgage
rates, maintenance costs and tax burdens.
This year, 23% of BTL purchases delivered double-digit yields, compared to
17% in 2024 and just 9% in 2016, with the north’s higher-yielding markets
playing a significant role.
Aneisha Beveridge, the head of research at Hamptons, said: “One of the main
ways landlords are trying to mitigate against higher stamp duty and
mortgage costs is by seeking better-yielding and cheaper properties,
increasingly in northern England.”
Strong student tenant demand
Simon Thompson, the managing director of Accommodation for Students, said:
“It’s interesting that yields have hit a 14-year high because there are
still investment opportunities around.
“It does look like yields will continue rising, which is food for thought
for student landlords with so many issues affecting the sector.
“And, as Paragon says, there are still strong returns available, though
Hamptons says the best results are in the North.”
He added: “With strong student tenant demand and a growing shortage of
properties to rent, landlords will undoubtedly continue seeing rent rises
that help deliver yields.”
