"Maintaining a strong understanding of trends, tendencies and inclinations is not always easy, especially from a regional perspective"
Geography has always played a key role for landlords and this remains evident across the current buy-to-let sector. Whether due to the ability to generate longer-term yields in certain areas, the proximity to home for the smaller landlords to make properties easier to manage, accessibility to universities/colleges for student lets and/or in tourist hot spots for those with holiday lets – location continues to represent an important factor for a variety of landlords.
Maintaining a strong understanding of trends, tendencies and inclinations is not always easy, especially from a regional perspective and especially during an economic climate which has generated such a huge amount of change – at pace. And the role of the adviser in filtering through relevant information for their landlord clients to help them make informed decisions in the right locations, is arguably more important than ever.
One good place to start when it comes to evaluating current market conditions is the Q1 iteration of Fleet Mortgage’s Buy-to-Let Rental Barometer. Across England and Wales, the Barometer showed both an annual and quarterly increase in rental yields, up from 6% a year ago, and 6.4% in the last quarter of 2022 to a current standing of 6.5%. This was said to be the highest on record since the Rental Barometer was first published.
As a result, the vast majority of regions saw both an annual and quarterly increase in rental yield, except the North West and the South West which saw quarterly drops of 0.1% and 0.2% respectively.
An annual rise of 0.6% was recorded in the East Midlands, South East, East Anglia and Greater London. This put rental yields at 6.5% in the East Midlands, 5.7% in both the South East and East Anglia, and 5.3% in Greater London. Greater London had the lowest rental yield compared to other recorded regions.
The North East of England continued to retain its top regional rental yield figure for the eleventh consecutive quarter at 8.8%, up 0.6% on the previous quarter, while Yorkshire and Humberside jumped into second place with a yield of 7.7%. Wales was the significant mover, up 1.1% annually and 0.6% quarter-on-quarter.
Average rental income across the regions came to £1,345 per month, up from £1,256 in the final quarter of 2022. This represented an annual increase of £135 since the first quarter of last year. Rental incomes ranged from an average of £660 per month in the North East to £2,049 in Greater London.
Fleet said that while rental yields were increasing in every region, it had not witnessed an increase in rents in all – for example, in the North East while yields remained above 8%, rents had decreased from £681 last quarter, with similar trends in both the East Midlands and the South East.
A combination of factors continue to drive demand and yield on a regional and national basis. And with a sustained fall in the supply of rental properties, increased tenant demand, house prices falling and product rates rising, landlords of all portfolio shapes and sizes are likely to need additional support when it comes to refinancing existing properties within these portfolios or in adding new ones to them.
