Buy-to-let landlords are enjoying a stable market with steady rental yields

05/08/22

The current time has been labelled a “very interesting period” across the private rented sector, as a number of issues as well as positive trends continue to impact the market. This is having an effect on landlords and lenders alike, according to Fleet Mortgages.

Current average rental yields for UK landlords sit at 5.5% according to Fleet’s latest quarterly rental barometer. This is slightly down on last year’s 6.1% average in Q2, and a small downtick of 0.2% on Q1 2022.

But as Steve Cox, Fleet Mortgages chief commercial officer, says: “This is, without doubt, a very interesting period for landlords, lenders, and the wider private rental sector, as we seek to marry up a number of ongoing issues which are all having an impact.”

“The positive news is that, as our Rental Barometer shows, yields are holding up well, and while we have seen a drop-off since the highs of last year, in general, there has been consistency across most regions on a quarterly basis.”

Rental yields by region

Buy-to-let landlords operating in Wales and the East Midlands are the two regions to have seen a slight increase in rental yields when looking on a quarterly basis, says Fleet.

The North West, West Midlands and south west have reported no change in the barometer’s quarter-on-quarter comparison, indicating ongoing stability in these regions.

The highest rental yields for landlords continue to be found in the North West, North East and Yorkshire and the Humber, where housing markets have been performing particularly strongly alongside increases in tenant demand.

It is this huge level of demand that is keeping yields consistent, says Cox, and the prediction is for this to largely continue.

He says: “Properties are highly sought after, and rents are strong due to the scarcity value of quality homes. Our anticipation is that, in most regions of the UK, yields will stay pretty constant especially while this supply-demand imbalance is in place.”

The lender highlights some particular towns and cities that are leading hotspots for landlords, including Manchester, Liverpool, Sheffield, Bristol and Cardiff.

Buy-to-let landlords are enjoying a stable market with steady rental yields, and certain towns and cities are proving especially strong.

The current time has been labelled a “very interesting period” across the private rented sector, as a number of issues as well as positive trends continue to impact the market. This is having an effect on landlords and lenders alike, according to Fleet Mortgages.

Current average rental yields for UK landlords sit at 5.5% according to Fleet’s latest quarterly rental barometer. This is slightly down on last year’s 6.1% average in Q2, and a small downtick of 0.2% on Q1 2022.

 “This is, without doubt, a very interesting period for landlords, lenders, and the wider private rental sector, as we seek to marry up a number of ongoing issues which are all having an impact.”

“The positive news is that, as our Rental Barometer shows, yields are holding up well, and while we have seen a drop-off since the highs of last year, in general, there has been consistency across most regions on a quarterly basis.”

Considerations for landlords

One recent survey from Handelsbanken found that almost half (49%) of portfolio landlords are considering buying more investment property in the year ahead. While this displays the overall positivity in the market, Cox says there are some factors all landlords need to consider.

“We know that many landlords would like to remortgage existing properties in order to fund new purchases, however, there are two areas to consider here,” he says.

“First is the increase in buy-to-let mortgage product pricing which has been obvious in the last couple of months, and secondly is a lack of supply to purchase.

“Both might well hold landlords back from acting right now. However, we do anticipate that 2022 will see strong levels of remortgaging throughout the rest of the year.

Wait and see approach

With numerous uncertainties affecting many sectors right now, from political instability to economic issues, it isn’t surprising that many property investors may be sitting back to see what happens with the market, despite the strong rental yields on offer.

“There may also be an element of landlords holding off any purchase ambitions as they await to see how house prices in the UK react to the double-whammy of the cost of living increases and more expensive mortgages.

“A number of economists anticipate this will see house prices dropping off their highs, which might present a better opportunity for acquisitive landlords.

“Overall, for existing landlords, the rental yield figures remain a strong source of comfort, and while we believe the level of demand for PRS properties will dip, there is likely to still be enough – especially compared to property choice – to ensure they maintain good levels throughout the rest of 2022.”

 

 

Source: Buyassociation

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