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North West is home to fastest growing buy-to-let yields

The north of England once again provided the greatest jump in rental returns for buy-to-let landlords in the second quarter of this year as demand from renters continued to heavily outstrip supply in the region. 

According to data from Fleet Mortgages’ buy-to-let index, average rental yields on residential buy-to-let properties currently stand at 5.3% across England, a marginal decline of 0.4% against figures achieved in Q2 2019.

On a regional basis, the North West of England posted the top rental yield regional figure for the quarter, up 0.6% year-on-year to 7.6%. 

The three regions to post positive rental yields over the period are the North West, West Midlands and the South East.

In contrast, the East Midlands posted the greatest year-on-year decline of 2.1% down to a 4.4% yield from 6.5% last year.

The Q2 figures do not include Wales, as different lockdown rules apply and no meaningful data is available to provide a robust rental yield figure.

Steve Cox, distribution director of Fleet Mortgages, said: “While we are very early into the post-lockdown ‘new normal’ the latest iteration of our Quarterly research appears to show a more promising picture for rental yield, than some might have predicted, with what we might describe as only a slight softening compared to the previous year.

“The economic backdrop may appear somewhat bleak at present, but this might change quickly depending on the type of recovery we get, and certainly at the moment our latest figures do not suggest sharp falls in rental yield. This may well be as a result of pent-up demand and more households being formed as a result of the lockdown, but it’s clear that more data will be required and it will be interesting to see whether this trend will be maintained into the rest of the year.

“Clearly, we will need to take into account the tailing-off of the furlough scheme and how this impacts on the level of unemployment in the country, the ability of existing tenants to keep paying their rent, and the re-introduction of evictions and repossessions at the end of the year, to get a clearer picture of where rents and yields are heading.

“What we do know, as a result of our experience through the Credit Crunch and the recession that followed, is rents are not as susceptible to these economic hits as property prices. Occupants are much more likely to opt for shorter-term financial commitments offered by renting in such circumstances, rather than move to longer-term property ownership.

“That being the case, and while the rental market outlook has undoubtedly weakened, we are hopeful that tenant demand will be maintained and even strengthen, and that with a relative shortage of properties to choose from, this will ensure rental levels and yield improve.

“At Fleet we are certainly seeing growing levels of interest from professional landlords adding to portfolios and that borrower demographic appears even more committed to property investment, which is good news for advisers active in this space.”

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