Investors looking for the best rental yields should target the North of England, which contains the most profitable areas, analysis from Fleet Mortgages shows.
In the North East investors achieved staggering rental yields of 8.7% in the first quarter of 2022, followed by Yorkshire and Humberside (7.5%) and the North West (6.7%).
Fleet suggests this mainly due to significant increases in demand around hotspot areas. These are generally situated in and around town and city centres such as Liverpool, Manchester and Sheffield.
The worst area for rental yields is Greater London (4.6%), followed by the South East (5.1%) and East Anglia (5.6%).
There have been reports of London investors buying property far afield in the past year, and this data goes some way to explaining why.
Yields have worsened by 0.6% over the past year across England and Wales, but they’ve stayed just as strong in the North East over that period.
They’ve also improved since the fourth quarter of 2021.
Steve Cox, chief commercial officer at Fleet Mortgages, said: “Looking further ahead, it’s likely that landlords are going to need to cut their cloth accordingly when it comes to setting rents, especially given the large increases in the cost of living that tenants are clearly not immune from and will need to be factored into rent levels.
“Overall, it’s obvious that property investment retains its allure as a strong asset class, and that the good news for landlords is the supply of finance from lenders like Fleet remains very strong with rates still at highly competitive levels.
“As we move through the year it is likely that rates will inch up though, however there are a wide range of opportunities for all types of landlords, wanting to purchase or refinance all types of rental properties, and that this should help bring much-needed supply into the PRS.”
|Average Rental Yields||y/y change|
|Region||2021 Q1||2022 Q1|
|Yorkshire and Humberside||7.9%||7.5%||-0.4%|
|England & Wales (Total)||6.3%||5.7%||0.6%|
Fleet said it continues to anticipate strong tenant demand right across England and Wales through the rest of 2022, however this might change towards the end of the year and into 2023, citing increases in mortgage rates, a tightening of government policies, and other pressures on household incomes, as having a specific impact.
It said buy-to-let mortgage rates had increased moderately during Q1 2022 with lenders absorbing increased funding costs in order to maintain volumes. Fleet expects rates to continue rising into the latter stages of 2022 as it suggested it was unlikely lenders would continue to absorb both Bank and swap rate increases.