Yields dip but forecast remains for strong demand through 2022

Annual rental yields in England and Wales have dipped but tenant demand is set to stay strong for the rest of 2022, says buy to let lender Fleet Mortgages.

Its latest market snapshot shows quarterly yields in England and Wales down 0.6 per cent in the first quarter, to an annual 5.7 per cent

All regions except the North East have seen drops in yield, with the largest next door in the North West. This was followed by the East Midlands and Greater London.

These areas saw annual yields dip between 0.5 and 1.0 per cent while all other regions’ rental yields decreased by 0.2 per cent to 0.4 per cent.

Fleet says Northern regions had the highest rental yields across England and Wales, with the North East on top for the seventh consecutive quarter at 8.7 per cent. Yorkshire and the Humber came second at 7.5 per cent and the North West came third at 6.7 per cent.

Steve Cox, chief commercial officer at the lender, says: “This demand-side strength, coupled with relatively tight supply, means rental yields continue to be strong, and that overall – across England and Wales – we have seen an increase in levels compared to the last quarter of 2021.”

He continues:  “Looking further ahead, it’s likely that landlords are going to need to cut their cloth accordingly when it comes to setting rents, especially given the large increases in the cost of living that tenants are clearly not immune from and will need to be factored into rent levels.

“… As we move through the year it is likely that rates will inch up though, however there are a wide range of opportunities for all types of landlords, wanting to purchase or refinance all types of rental properties, and that this should help bring much-needed supply into the private rented sector”.