Landlords are reaping record-breaking rental yields as strong tenant demand drives growth in key regions, according to Paragon Bank's latest lending data. The average gross yield now stands at 7.02%, surpassing 7% for the first time since the post-lockdown period in 2021.
Regional performance varies significantly, with Scotland witnessing the most substantial quarterly increase of 0.53 percentage points, pushing its average yield to 7.97%. Other areas experiencing notable gains include the West Midlands (up 0.24 percentage points to 7.24%), Yorkshire and Humber (up 0.21 percentage points to 7.58%), and Wales, which maintains its position as the highest-yielding location with an impressive 8.87%.
Meanwhile, Greater London saw a slight dip of 0.16 percentage points, falling to 5.58%, placing it at the lower end of the regional table. The South East follows, with an average yield of 6.48%. These figures underscore a dynamic rental market where localised demand and property types significantly influence landlord returns.
Louisa Sedgwick, Managing Director of Mortgages at Paragon, attributed the strengthening gross rental yields to sustained tenant demand and subdued house price growth in certain segments. She also highlighted the continued strong performance of Houses in Multiple Occupation (HMOs), which increased by 0.14 percentage points to 8.90%. Multi-unit blocks followed with yields of 7.18%, while flats generated 6.45% and terraced homes 6.31%, underlining the importance of specialist rental accommodation.
This growth in rental yields coincides with landlords navigating evolving regulatory landscapes and economic pressures. The figures suggest that despite these challenges, the buy-to-let sector remains attractive, particularly in regions and for property types where tenant demand is highest. The government's ongoing focus on housing supply and quality standards means landlords will continue to adapt, while a robust tenant market provides stability.