New data gives a strong indication of the rental yields being achieved



Fleet Mortgages has launched the sixth iteration of its Buy-to-Let Rental Barometer covering Q2 2021 rental yields across England and Wales.

The regional snapshot covers all the areas in which the buy-to-let specialist lends in England and Wales, and highlights the rental yield changes that have occurred in each region.

In this iteration, the annual comparison is between Q2 2021 and Q2 2020. For the second time this year, the Barometer is also able to include figures for Wales as Fleet now has meaningful data to provide a robust rental yield figure. However, figures for Q2 2020 for Wales are only based on limited data.

Average Rental Yields y/y change
Region 2020 Q2 2021 Q2
North East 7.7% 8.0% 0.3%
Yorkshire and Humberside 6.1% 7.2% 1.1%
North West 8.1% 6.9% -1.2%
Wales 15.2% 6.3% -8.9%
West Midlands 6.6% 6.1% -0.5%
East Anglia 5.1% 6.0% 0.9%
South West 5.0% 5.6% 0.6%
East Midlands 4.5% 5.5% 1%
South East 5.8% 5.2% -0.6 %
Greater London 4.9% 4.7% -0.2%
England & Wales (Total) 5.6% 5.6% 0%

 

Overall, the Barometer shows rental yields on residential buy-to-let properties of 5.6% across England and Wales, exactly the same figure achieved in the second quarter of 2020. This is however 0.7% down on the rental yield figure for the last three-month period covering Q1 2021.

In the last iteration of the Barometer every single region showed a drop on the year-on-year figures, however as Fleet predicted quarterly improvements were likely as the new 2020 figures covered a month and a half after Lockdown 1 was eased last year.

It means five out of 10 regions now show a yearly increase, those being the North East, Yorkshire & Humberside, the East Midlands, the South West and East Anglia.

But comparing Q2 this year to Q1 does show that a number of regions have come off their high rental point posted in the first three months of the year. Only three regions – Wales, East Anglia and the South East – showed a quarterly increase of 0.5%, 0.4% and 0.1% respectively, while the other regions all posted falls.

Once again, the North East of England posted the top rental yield regional figure for the fourth quarter running, this time hitting 8%, with Yorkshire & Humberside in second spot at 7.2%, and the North West with 6.9%. All three regions are in the same position as Q1 this year.

Fleet said the overall data showed a continuing strong rental yield across England and Wales as a whole, and individual regions, with a more uniform look to the figures as those regions with lower rental yields began to inch up, and those with higher figures dropped down slightly.

The lender that the continuing strength of tenant demand, married with an ongoing lack of supply, would continue to drive rental yields, and existing landlords had taken the opportunity to add to portfolios through the stamp duty holiday period, and were likely to continue to do so in order to meet tenant demand.

Steve Cox, chief commercial officer at Fleet Mortgages, commented: “In the last iteration of the Rental Barometer, we suggested the figures were something of a ‘red herring’ as they compared the first quarter of this year with a period just prior to Lockdown 1. These figures also cover a period half of which saw the housing market effectively closed down, so we are also cautious about the yearly comparison, particularly for Wales because it is based on limited data.

“However, our data for Q2 2021 and the first quarter of this year is very robust and gives a strong indication of the rental yields being achieved across all the regions Fleet lends in.

“We’re starting to see a degree of stability in these with a number of regions which have posted close to double-digital rental yields slipping back slightly, and those who were at the other end of the scale starting to creep up.

“There are of course exceptions to this, specifically Greater London, which has seen rental yield drop again, however this is a very complex [and often different] regional market to others within the country, and we should not think it is indicative of other regions or indeed what is to come there.

“The positives for landlords are the still strong yields being achieved pretty much right across the board, and certainly in the North we can see tenant demand continuing to outstrip supply. Indeed, in other regions we can view the ongoing strength of demand, as tenants seek to move to properties which may be more in keeping with a post-pandemic work/life balance.

“Overall, the PRS could clearly benefit from greater levels of supply, however landlords are adding to portfolios in order to meet this gap, and the strength of the buy-to-let investment remains undiminished. Which is clearly good news for advisers active in this space, who have a highly competitive buy-to-let lending market to choose from in order to support the needs of landlord borrowers.”

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