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Landlords not confident about ‘stable’ rental yields

Rental yields remain steady, and yet many buy-to-let landlords are losing confidence in their ability to rely on rental income, a new report shows.

The drop-off in confidence coincides with the period since the announcement from the then Chancellor George Osborne in July 2015 that mortgage interest relief would be removed for landlords, according the latest figures from the National Landlords Association (NLA).

The data reveals that the proportion of landlords who are optimistic about their ability to rely on a steady rental yield has dropped 15% in the past two years – down from 64% in the second quarter of 2015 to just 49% in Q2 2017.

But the sentiment contrasts with actual rental yields achieved across the UK, which have remained fairly stable. Over the past few years, the average yield has fluctuated around the 6% mark.

Buy-to-let investors looking for high rental returns may wish to consider investing in the East Midlands, where landlords currently generate the highest rental yields at 6.9%. By contrast, landlords in outer London generate the lowest yields at 5%. A full regional breakdown can be found below.

Richard Lambert, chief executive officer at the NLA, said: “Average rental yields have remained fairly stable over the past few years, yet there is a steady increase in landlords losing confidence in their ability to make a profit from letting property.

“This perception probably exists because many will now be feeling the impact on their businesses of greater taxation and the costs of complying with regulation, which are eating away at their profits and making it harder to provide homes.

“Like any business, the increasing value of the capital assets on your balance sheet will be of little help if you are treading the fine line between profit and loss, especially if you can’t keep up your mortgage payments in the short term”.

Region

Rental Yield

East of England

5.7%

East Midlands

6.9%

London (Central)

5.3%

London (Outer)

5%

North East

6.1%

North West

6.4%

Scotland

6.3%

South East

5.6%

South West

6.2.%

Wales

6.2%

West Midlands

6.3%

Yorkshire and Humber

5.6%

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