Yields dip but lettings market strong thanks to soari...

Breaking News

19 July 2022

5594 Reads
5 Comments

By Graham Norwood

TODAY'S OTHER NEWS

Yields dip but lettings market strong thanks to soaring demand

A mortgage lender’s buy to let market index shows yields slightly dipping.

Fleet Mortgages’ regional snapshot covers all areas of England and Wales comparing Q2 2022 and Q2 2021.

The index shows a small fall in annual rental yields from 6.1 per cent a year ago to 5.5 per cent now.

Every area of England and Wales saw a drop in rental yields of 0.1 to 0.9 per cent.

A more recent quarterly comparison with Q1 2022 shows that two regions – Wales and the East Midlands – have seen rental yields increase.

Three Northern regions – the North East, Yorkshire & Humberside, and the North West – continued to see the highest levels of rental yields up to 8.3 per cent.

Wales saw a 0.6 per cent quarterly increase in yield with the East Midlands up by 0.3 per cent.

The familiar story of demand exceeding supply is the cause and Fleet says this is particularly so hotspots such as Liverpool, Manchester, Sheffield, Bristol and Cardiff.

Fleet says that while yields had dropped off the recent highs of the last 12 months, it was apparent that strong tenant demand and a low level of supply would keep yields relatively strong.

Steve Cox, chief commercial officer at Fleet Mortgages, comments: “The positive news is that, as our Rental Barometer shows, yields are holding up well, and while we have seen a drop-off since the highs of last year, in general there has been a consistency across most regions on a quarterly basis.

“That clearly has much to do with strong tenant demand, married up with relatively low levels of supply. Properties are highly sought after, and rents are strong due to the scarcity value of quality homes. Our anticipation is that, in most regions of the UK, yields will stay pretty constant especially while this supply-demand imbalance is in place.

“We know that many landlords would like to remortgage existing properties in order to fund new purchases, however there are two areas to consider here. First is the increase in buy-to-let mortgage product pricing which has been obvious in the last couple of months, and secondly is a lack of supply to purchase.

“Both might well hold landlords back from acting right now, however we do anticipate that 2022 will see strong levels of remortgaging throughout the rest of the year, and as lenders get on top of their current service issues, we will see a return to stability, and pricing, for buy-to-let mortgages, although this might not be visible until the early part of next year.

“There may also be an element of landlords holding off any purchase ambitions as they await to see how house prices in the UK react to the double-whammy of the cost of living increases and more expensive mortgages. A number of economists anticipate this will see house prices dropping off their highs, which might present a better opportunity for acquisitive landlords.

“Overall, for existing landlords, the rental yield figures remain a strong source of comfort, and while we believe the level of demand for PRS properties will dip, there is likely to still be enough – especially compared to property choice – to ensure they maintain good levels throughout the rest of 2022.”

We're excited to announce that we're working on building a shiny new website for readers of Landlord Today! As part of this process, commenting on articles will be temporarily disabled. We look forward to sharing our new and improved Landlord Today website with you shortly!