Landlords across the UK are seeing their best returns in over a decade, with average rental yields climbing to their highest level since 2011.
According to the latest data from buy-to-let mortgage lender Paragon Bank, average rental yields rose to 6.93% in December 2024 – a figure not seen since February 2011, when they peaked at 7.12%.
This marks a steady upward trend, with yields increasing from 6.72% in the third quarter of 2024 and rising 30 basis points compared to the same period the previous year.
With demand for rental properties showing no signs of slowing, the latest figures paint a confident picture for the UK’s buy-to-let market as it heads into 2025.
ONGOING GROWTH
The data, drawn from Paragon Bank’s buy-to-let mortgage records for both purchases and remortgages, highlights the ongoing growth in landlord returns since mid-2022.
Stable house prices combined with rising rents have pushed yields higher, as demand for privately rented homes continues to outstrip available supply.
Regionally, Wales led the way with the strongest rental yields at 8.09%, followed closely by the North West at 7.84% and the South West at 7.75%.
Regionally, Wales led the way with the strongest rental yields at 8.09%, followed closely by the North West at 7.84% and the South West at 7.75%.
In contrast, landlords in Greater London recorded the lowest yields at 5.48%, reflecting the capital’s significantly higher property prices.
The type of property also played a key role in yield performance. Houses in Multiple Occupation (HMOs) offered the most lucrative returns, delivering average yields of 8.40%.
Freehold blocks generated yields of 7.28%, while flats and terraced houses achieved 6.09% and 6.05% respectively.
STRONGER SHAPE
Russell Anderson, Commercial Director at Paragon Bank, stresses that these figures reflect a buy-to-let market in stronger shape than some might suggest.
He says: “A 13-year high in average rental yields shows that the sector is far more resilient than some headlines would have you believe. Strategic landlords – those investing in more affordable regions and focusing on complex property types like HMOs – are seeing particularly strong returns.”
KEY DRIVERS
And he adds: “Demand remains a key driver. The supply of privately rented homes has lagged behind for some time, pushing up rents and sustaining robust yields despite house price inflation.”
While rental yields provide a solid measure of a landlord’s regular income, Anderson points out that they are only part of the picture.
He says: “To truly understand buy-to-let returns, you also have to consider factors like how a property is financed, capital appreciation, the size of the landlord’s deposit, and any value-adding improvements made to the property.”
