Landlords generated average rental yields of 6.3% in the second quarter of the year, the highest level in a decade, according to new research published by Paragon Bank.

The bank’s latest report into the private rental sector (PRS) revealed that average yields generated by landlords have not hit 6.3% since Q3 2014 and have not surpassed the current level since Q3 2012 when they reached 6.7%.

Paragon’s analysis revealed that the current high marks a recovery in yields achieved by landlords, which have climbed steadily from the 15-year low of 5.2% recorded in the first and second quarters of 2023.

Managing director for mortgages at Paragon, Richard Rowntree, said: “Rental yields are a key measure of the health of lettings businesses so it’s fantastic to see them hit a 10-year high after rebounding from the low recorded around this time last year.”

Paragon’s research, based on a survey of 799 landlords during June and July, indicated a correlation between portfolio size and yields, with higher average yields of 6.9% reported by landlords with larger portfolios of 11 or more properties.

Yields of 6.9% were also generated by landlords who hold all their properties in limited company structures.

A similar divergence could be seen when the data was split by property type, particularly houses in multiple occupation (HMOs), whose owners reported yields of 7.2%.

Rowntree added: “We see that, compared to the wider market, higher yields are reported by landlords who have larger portfolios that include HMOs and are held in limited company structures.

“Each of these attributes is a hallmark of what can be considered professional landlords. While I prefer not to label business owners as amateur or professional, the common theme here is that the ‘professionals’ are the ones employing strategies for success.

“We hear lots about how buy-to-let doesn’t stack up for many landlords, but this is evidence that with the correct strategies, even the challenges of the past year or so can be overcome.”

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