{"id":6097795,"date":"2023-10-20T08:50:43","date_gmt":"2023-10-20T07:50:43","guid":{"rendered":"https:\/\/www.buyassociationgroup.com\/en-gb\/?p=6097795"},"modified":"2024-07-24T14:26:34","modified_gmt":"2024-07-24T14:26:34","slug":"buy-to-let-yields-up","status":"publish","type":"post","link":"https:\/\/www.buyassociationgroup.com\/en-us\/news\/buy-to-let-yields-up\/","title":{"rendered":"Buy-to-let prospects “strengthened” as yields continue to rise"},"content":{"rendered":"

Metrics in the buy-to-let market have strengthened according to the latest reports, and the view for at least the short-term is that yields will hold strong for landlords.<\/strong><\/p>\n

It can be very difficult to get a true picture of what is happening in the buy-to-let sector, with reports of landlords selling up after being affected by tax rule changes and rising interest rates, combined with other studies showing that many landlords are still keen on snapping up UK property thanks to its strong long-term prospects<\/a>.<\/p>\n

Undoubtedly, while property price trends can have an impact on investor sentiment, recent reports of stagnating house price rises are arguably offset by the fact that UK property values remain around 17% higher now than they were pre-pandemic in October 2017, looking at Rightmove’s figures<\/a>.<\/p>\n

Added to this is the fact that many landlords are more focused on their yields than potential capital appreciation prospects, as investments are normally the most lucrative when they involve holding onto the property for a number of years. And at the moment, rental yields for UK buy-to-let are on the rise.<\/p>\n

The latest report from Fleet Mortgages<\/a> has revealed that yields have in fact risen for three consecutive quarters, with the average landlord now reaping 6.9% across England and Wales – a 1% rise compared with the third quarter of 2022, and a 0.6% jump on Q2 2023’s figures.<\/p>\n

Where are the top buy-to-let rental yields?<\/h4>\n

According to Fleet Mortgages’ latest quarterly rental market barometer, the three regions with the best rental yields in Q3 are the north east, where the average landlord brings in 9.10%; the north west<\/a> (7.60%); and the West Midlands<\/a> (7.50%).<\/p>\n

While every single region in the UK in Q3 recorded a yield increase on an annual basis, the regions with the biggest percentage jumps were the West Midlands, East Anglia and the south east, which all saw yields increase by 1% or more during the period.<\/p>\n

Although London’s buy-to-let market recorded a healthy yield rise, from 4.90% in Q3 last year to 5.60% in Q3 this year, it remains at the bottom of the pack overall, and below the UK average of 6.90%. Likewise, East Anglia (6.50%), south west (6.40%), south east (6.20%), and East Midlands (6.10%) are below national average.<\/p>\n

The boost in rental yields can be explained by steadily climbing rents<\/a> across the country, due to factors such as a shortage of supply in the buy-to-let market, which leads to more competition among tenants and therefore rising prices.<\/p>\n

As Fleet’s report points out, research by Octane Capital shows that while average buy-to-let mortgage payments have increased by around 13% due to rising interest rates, rental prices have only risen by 10% over the same period. This implies many landlords are not passing on the full cost increases to their tenants.<\/p>\n

An affordability boost<\/h4>\n

Fleet also notes that affordability has been boosted this quarter due to softening mortgage rates, and the introduction of high-fee products “to combat the increased ICR [interest coverage ratio] calculations”.<\/p>\n

This appears to have boosted borrowing levels in the buy-to-let sector, with Fleet’s figures showing that landlords borrowed around \u00a313,000 more this quarter compared to Q2, an increase of 7.5% from \u00a3174,000 to \u00a3187,000.<\/p>\n

According to Steve Cox, chief commercial officer at Fleet Mortgages, there are a multitude of factors at play in the buy-to-let market right now that are have led to it strengthening throughout the UK, and bringing the expectation that it will continue to do so.<\/p>\n

\u201cMany of the themes that have been evident in the buy-to-let and private rental sector throughout 2023 continue to strengthen, particularly when it comes to demand for purchase versus remortgage activity, meeting affordability challenges, tenant demand, property supply, and the overall impact on yields and rents,” he said.<\/p>\n

\u201cUnsurprisingly, when you add all this together, we find annual rental yields having grown in every single region compared to last year, and this has resulted in a significant 1% increase in yield for England & Wales as a whole.”<\/p>\n

Cox points out that the short-term outlook at least is a continuation of what we have seen, adding that portfolio landlords<\/a> in particular are continuing to seek opportunities to invest in more property; although some landlords with much smaller portfolios may be struggling in the current climate.<\/p>\n

Commenting on the fact that Fleet Mortgages has been one of a number of lenders to cut its product pricing in recent weeks, he adds:\u00a0\u201cMore adjustments will be forthcoming if the rate environment continues to be calmer, and if product pricing can move more towards an average 5% rate, then we anticipate business levels will improve as landlords are better able to meet the affordability criteria that come with today\u2019s marketplace.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Metrics in the buy-to-let market have strengthened according to the latest reports, and the view for at least the short-term is that yields will hold strong for landlords. It can be very difficult to get a true picture of what is happening in the buy-to-let sector, with reports of landlords selling up after being affected… Read more »<\/a><\/p>\n","protected":false},"author":1069,"featured_media":6099844,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[2,4,6],"tags":[22,71,17,5],"acf":[],"_links":{"self":[{"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/posts\/6097795"}],"collection":[{"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/users\/1069"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/comments?post=6097795"}],"version-history":[{"count":1,"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/posts\/6097795\/revisions"}],"predecessor-version":[{"id":6099845,"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/posts\/6097795\/revisions\/6099845"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/media\/6099844"}],"wp:attachment":[{"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/media?parent=6097795"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/categories?post=6097795"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-us\/wp-json\/wp\/v2\/tags?post=6097795"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}