Rental returns across England and Wales remain solid, with total average yield for England and Wales hitting 7.4% in Q1 2025, up 0.3% on the same quarter last year, and at exactly the same level as the previous quarter, the latest figures show.
According to Fleet Mortgages, which carried out the research, rental yields remain almost universally positive, with once again only one region in England and Wales, Yorkshire & Humberside, showing a year-on-year fall, and that was from a high level with only a 0.4% dip.
However, compared to the previous quarter, a number of regions have seen slightly reduced yields – the North East down by 0.1%, the South West down by 0.2%, both Wales and Yorkshire & Humberside down by 0.5% and East Midlands down by 0.6%.
Even with the slight quarterly dip of 0.1%, the North East continues to lead the average rental yield table at 9.2% with the North West moving back up to second place with 8.4%, while Yorkshire & Humberside has slipped down one place to third with 8.1%.
The big mover in this iteration of the Rental Barometer was the West Midlands which saw a quarter-on-quarter increase of 1.1%, with the next biggest mover being East Anglia, which rose 0.4% over the quarter.
| Average Rental Yields | y/y change | ||
| Region | 2024 Q1 | 2025 Q1 | |
| North East | 8.4% | 9.2% | 0.8% |
| North West | 7.9% | 8.4% | 0.5% |
| Yorkshire and Humberside | 8.5% | 8.1% | -0.4% |
| Wales | 7.4% | 7.7% | 0.3% |
| West Midlands | 7.6% | 7.7% | 0.1% |
| East Midlands | 6.6% | 7.1% | 0.5% |
| South West | 6.2% | 6.7% | 0.5% |
| East Anglia | 6.4% | 6.7% | 0.3% |
| South East | 6.1% | 6.5% | 0.4% |
| Greater London | 5.9% | 6.0% | 0.1% |
| England & Wales (Total) | 7.1% | 7.4% | 0.3% |
Fleet said that rental yield levels have begun to stabilise in recent months from the larger increases that were seen throughout 2024. However, it anticipates levels are likely to remain between 5% to 9% across the various regions, not least due to the continued strong tenant demand set against the relative lack of property supply available to them.
The lender’s data also reveals the highest average monthly rent per property was generated within Greater London at £2,185 – a quarterly increase of 6.3% – followed by the South East at £1,575. Again, properties located within the North East typically contain the most affordable rental stock, with an average monthly rent of £739.
In terms of landlord make-up and activity, Fleet said it continues to observe high demand (39%) from those looking to add properties to their rental portfolios, although this has dipped slightly from 44% in the previous quarter, which might be due to the increase in the stamp duty surcharge, which was increased to 5% from 3% by the government last year.
The average number of properties held within a typical landlord’s portfolio is nine, with over 55% of applications received during the quarter from landlords holding four or more rental properties. However, there has also been an increase in the number of applications from first-time landlords, up from 11% in the last three months of 2024, to 14% now.
The Rental Barometer also includes data covering average rates and loan sizes.
Comparing the last two quarters, Fleet’s product pricing on its average two-year fixed-rate products continued to fall, moving from 4.71% to 4.63%, while its average five-year fixed-rate pricing increased slightly from 5.11% to 5.15%.
Peer group average rates were 5.16% for two-year fixed-rates, down from 5.33%, but had seen a slight increase from 5.45% to 5.48% for five-year.
Fleet’s average loan size continued to increase on the previous quarter, up from £202k to £207k, with the average rental cover at loan origination also increasing from 182% to 190%, again reflecting improved monthly rents and affordability.
Steve Cox, chief commercial officer at Fleet Mortgages, commented: “Rental yield levels are showing signs of stabilisation, however they are stabilising at a higher level due to the increases seen across most regions over the course of the last 12 months.
“That remains a real positive for landlords and much can be put down to the continued demand-supply imbalance, the fact rates have been moving downward, and affordability is easier to achieve across the board.
“We of course see regional variations across England and Wales, with a number of regions showing a dip in yields quarter-on-quarter, however as mentioned, this has to be set against the context where yields have shown significant increases over the past 12-18 months.
“One of the interesting aspects of this Barometer is the slight dip we saw in purchase applications through the last three-month period, down from 44% in Q4 2024 to 39% in Q1 this year.
“It is too early to show this as a discernible trend, but we obviously had the increase in stamp duty surcharge announced at last year’s Budget, and we will be tracking whether purchase business dips as a result of the increased taxation costs for landlords in buying property.
“That said, activity levels – in terms of both remortgage and purchase – have remained strong, which suggests landlords do want to add to portfolios, and can sense the strong market for them in terms of tenant demand, and what this means for rental levels and ongoing yield/profitability.
“In terms of product pricing, Fleet continues to outperform our peer group on both two-year and five-year fixed-rate pricing, plus we have tracker options as well, which may be popular with those landlord borrowers who anticipate rates may continue to fall over the course of the next year or so.
“Finally, the increase in first-time landlords is also encouraging. Even with the stamp duty costs, and other barriers to entry in terms of ongoing property costs, increased regulation and legislation like the forthcoming Renters’ Rights Bill, it appears property investment retains its allure as long-term asset to hold.”
Read the orginal article: https://propertyindustryeye.com/rental-yields-showing-signs-of-stabilisation/
