Steady rental yields confound landlord fears

Modern two storey flats

Rental yields are continuing to deliver consistently, despite a recent report highlighting the concerns and lack of confidence that many buy-to-let landlords are feeling.

Data from the National Landlords Association (NLA) suggests that there has been a large increase in the number of buy-to-let landlords losing confidence in the likelihood of deriving a regular rental income on their properties.

NLA figures show a drop of 15%, over the last two years, in the number of landlords remaining upbeat about rental yields. The fall in confidence (from 64% in the second quarter of 2015, to 49% in the same quarter of 2017), comes at a time when mortgage interest tax relief has experienced its first stepped decrease, now 75% from 100% relief.

However, whilst landlord feelings remain negative, the returns experienced have maintained stability, with the average yield in the region of 6%, reasserting the potential of buy-to-let as a feasible means of making a competitive return on investment.

Statistics reveal that the highest rental yields are currently in the East Midlands, where landlords can generate 6.9% returns.

UK Region Rental Yield
East of England 5.7%
East Midlands 6.9%
London (Central) 5.3%
London (Outer) 5.0%
North East 6.1%
North West 6.4%
Scotland 6.3%
South East 5.6%
South West 6.2%
Wales 6.2%
West Midlands 6.3%
Yorkshire & Humberside 5.6%

Richard Lambert, chief executive officer at the NLA, said:

Average rental yields have remained fairly stable over the past few years, yet there is a steady increase in landlords losing confidence in their ability to make a profit from letting property.

“This perception probably exists because many will now be feeling the impact on their businesses of greater taxation and the costs of complying with regulation, which are eating away at their profits and making it harder to provide homes.

Andrew Turner, chief executive at Commercial Trust commented:

It is unsurprising that landlords have concerns about rental returns, given recent legislative changes, which have turned the screw on costs.

“However, the bigger picture is one based on results rather than perceptions and the latest NLA figures are encouraging and should help instil greater confidence in landlords that the yields they can generate remain sustainable, even given the recent upheaval within the housing market.

“I continue to feel very positive about buy-to-let as an investment opportunity and recently analysed a number of points of concern, to demonstrate what I feel is a more realistic and positive view of the future of the industry.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.