Average rental yields achieved by landlords increased to their highest level since March 2011 during the fourth quarter of 2024, Paragon Bank has revealed.

The bank found that landlord rental yields reached an average of 6.93% in December 2024, the highest level since February 2011 when the figure stood at 7.12%.

The figures revealed that the high follows an increase from 6.72% at the end of Q3 2024, while also representing a growth of 30 bps since the same period of 2023.

Paragon said that this marks a continuation of increasing yields since midway through 2022, with house price inflation stabilising while continued to rise, "fuelled by an imbalance between the supply of privately rented homes and tenant demand".

Mortgages commercial director at Paragon, Russell Anderson, said: "A 13-year high in average rental yields is evidence of the market being in much better health than some would have you believe. Where landlords invest strategically, purchasing in areas where homes are relatively affordable and targeting more complex property types, buy-to-let (BTL) delivers strong returns.

"A key component of this is demand, something that has outstripped the supply of privately rented homes for some time. This has caused market rents to rise which, in turn, has helped to sustain strong yields despite house price inflation."

In analysis of the data in terms of regions, the highest yields were achieved by landlords with properties in Wales at 8.09%.

This was followed by the North West, where BTL properties generating average yields of 7.84%, and 7.75% in the South West.

Landlords with properties in Greater London achieved yields of 5.48%, making it the area with the lowest average rental yields.

Paragon added that consistent with historical yield data, property types typically considered to be complex business often generated the strongest returns on BTL investments.

HMOs generated the highest yields of 8.40%, followed by freehold blocks at 7.28%, flats at 6.09% and terraced houses at 6.05%.

Anderson added: "While yields are a good indicator of the regular income that landlords will typically see, to get a complete picture of the returns an investment property can generate, we must also take into account aspects such as how they are financed, capital gains, landlord deposit and any improvements that have been made."

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