Fourth quarter of 2021 sees slight fall in rental yields

The fourth quarter of 2021 saw a slight fall in rental yields, down from 6.2% in Q4 a year ago to 5.6%, new figures from Fleet Mortgages have indicated.

Three regions, however, posted a yearly increase in this iteration, compared to just one – the South East – last time.

Fleet reported that the regions which have seen a slight drop in rental yields over the last year, are on the whole only posting a figure slightly down on Q4 2020 – with the exception of the North West and East Midlands, in which yields are down by over 1%. 

The specialist lender published the data as part of its Buy-to-Let Rental Barometer covering Q4 2021 rental yields across England and Wales.

For the sixth consecutive quarter running, the North East of England has the top rental yield regional figure, dipping slightly to 7.9% but still holding onto the number one spot. However, Fleet did report some movement in the places below, with Wales continuing to show strength with its 7%-plus rental yield, to move it into second place, just ahead of Yorkshire & Humberside.

The most significant jump over the year was in East Anglia, which has increased by 1.4% to 6.8%. Yields in the South East are also improving steadily, having now seen a positive year-on-year change for two quarters running.

The lender suggested this could be as a result of changing behaviours from tenants, more working from home, as well as a widening of searches to incorporate larger properties and garden space outside city centres.

Fleet chief commercial officer, Steve Cox, said that the figures show that rental yields are “keeping pace” with property prices which have risen by approximately 10% over the last 12 months.

“This is good news for the private rental sector and landlord borrowers,” he said.

“In terms of how this might impact landlord activity, it looks increasingly positive for 2022 particularly as professional investors review the recent capital increases in their properties and make the most of them via refinancing in order to secure the deposits required for new purchases.

“With these yield figures showing a strong yearly return possible across most regions of the UK, and with house prices likely to continue on an upward trajectory due to a continued lack of supply, property investment and buy-to-let is likely to retain its allure.”

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