Rental yields down 0.6% yearly in 2021

Those regions which have seen a slight drop in rental yields over the last year, on the whole only posted a figure slightly down on Q4 2020.

Rental yields down 0.6% yearly in 2021

Across England and Wales, rental yields fell from 6.2% a year ago to 5.6% during the last quarter of 2021, according to Fleet Mortgages' Buy-to-Let Rental Barometer.


However, three regions - East Anglia, West Midlands and the South East - posted a yearly increase in this iteration, compared to just the South East last time.

Those regions which have seen a slight drop in rental yields over the last year, on the whole only posted a figure slightly down on Q4 2020, with the exception of the North West and East Midlands, in which yields are down by over 1%.

For the sixth consecutive quarter running, the North East of England had the top rental yield regional figure, dipping slightly to 7.9% but still holding onto the number one spot.

Wales continued to show strength with 7%-plus rental yield, to move it into second place, just ahead of Yorkshire & Humberside.

The most significant jump over the year is in East Anglia, which has increased by 1.4% to 6.8%.

Most properties financed by Fleet in the region were concentrated around the larger towns such as Norwich, Peterborough and around the outskirts of Greater London.

Yields in the South East also improved steadily, seeing positive change for two quarters running.

Steve Cox, chief commercial officer at Fleet Mortgages, said: “Our new rental barometer, covering the last three months of 2021, shows that rental yields are keeping pace with property prices which have risen by approximately 10% over the last 12 months. This is good news for the private rental sector and landlord borrowers.

“Three regions continue to offer 7%-plus yield and the North East retains its top spot, although Wales has shown a significant increase over the year as tenant demand continues to improve there, possibly as a result of the growing working from home trend.

“East Anglia has posted the biggest year-on-year increase, while conversely both the North West and East Midlands fell by the most.

"However, these drops are from points above a 7% yield and again we anticipate they will stabilise as the year continues.

“In terms of how this might impact landlord activity, it looks increasingly positive for 2022 particularly as professional investors review the recent capital increases in their properties and make the most of them via refinancing in order to secure the deposits required for new purchases.

“2022 has been described as a big year for remortgaging in the buy-to-let space, and that looks highly likely, but it will be remortgaging with a reason for existing landlords, who tend to capital raise in order to secure the funds they need for portfolio growth.

“With these yield figures showing a strong yearly return possible across most regions of the UK, and with house prices likely to continue on an upward trajectory due to a continued lack of supply, property investment and buy-to-let is likely to retain its allure.

“This is good news for advisers active in this space, and their clients, who are going to benefit from a highly competitive finance market and access to lenders like Fleet who have a strong appetite to lend right across the piece.”