Paragon Bank has reported that average rental yields for landlords reached a 13-year high in December 2024, hitting 6.93%.
This was the highest level since February 2011 when yields were at 7.12%.
The increase follows a rise from 6.72% in Q3 2024 and is 0.30% higher than the same period in 2023.
Regionally, landlords in Wales achieved the highest yields at 8.09%, followed by the North West at 7.84% and the South West at 7.75%.
Greater London saw the lowest average yields at 5.48%.
Houses in multiple occupation (HMOs) offered the highest yields at 8.40%, followed by freehold blocks at 7.28%, flats at 6.09%, and terraced houses at 6.05%.
Russell Anderson, commercial director at Paragon Bank, said: “A 13-year high in average rental yields is evidence of the market being in much better health than some would have you believe.
“Where landlords invest strategically, purchasing in areas where homes are relatively affordable and targeting more complex property types, buy-to-let delivers strong returns.
“A key component of this is demand, something that has outstripped the supply of privately rented homes for some time.”
Anderson added: “This has caused market rents to rise which, in turn, has helped to sustain strong yields despite house price inflation.
“While yields are a good indicator of the regular income that landlords will typically see, to get a complete picture of the returns an investment property can generate, we must also take into account aspects such as how they are financed, capital gains, landlord deposit and any improvements that have been made.”
