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Yields dip but rental market strong says top lender

Popular buy to let lender Fleet Mortgages’ latest rental yield index shows the consequences of increasing property prices in many regions of the country.

Comparing the final quarters of both the 2019 and 2020 calendar years, Fleet finds that yields on residential buy to lets in England were on average 5.7 per cent -  down 0.3 per cent on a year ago. 

For the second successive quarter the North East of England posted the top rental yield regional figure of 7.9 per cent, although this too was down - by 1.5 per cent - on a year earlier. 


Only two regions of England posted positive rental yields over the period – the East Midlands and the South West.

Fleet believes the rental market UK-wide is broadly stable and the demand for the private rental sector remained strong, fuelled by the formation of more new households.

Fleet also analyses the portfolio landlord sector – those investors with four or more properties with buy to let mortgages. 

It says the typical portfolio landlord has eight properties in their portfolio, generating an average rental yield of 5.7%.

These portfolio landlords are more likely to purchase property during the fourth quarter of last year than a year earlier, fuelled by the stamp duty holiday.

There’s also been a rise in purchases via limited companies, which attracts more tax benefits; in Q4 2019, some 50 per cent of all purchases by portfolio landlords were through a limited company, and this rose to 67 per cent in the same period in 2020. 


Steve Cox, chief commercial officer at Fleet Mortgages, says:“One of the key themes of 2020 was the post-lockdown house price increases that we saw right across the country, particularly with pent-up demand being unleashed, the supply of properties to market still relatively low, and policies like the stamp duty holiday which, in many cases, produced savings which ultimately were utilised by purchasers in higher offers.

“Those house price increases have undoubtedly resulted in a dampening of rental yields in almost all the regions Fleet lends in. However, in both the East Midlands and the South West we still saw yearly increases, and both the East Midlands and Greater London posted quarterly rises.

“The point to make however is that rental yields are still holding up well, with every single region showing yields of five pr cent and above, plus we also envisage that these types of figures are unlikely to drop significantly throughout the rest of 2021.

“Demand for private rental property remains strong and, coupled with a lower supply level in most parts of the UK due to the lack of social housing available, the options for many tenants lie purely in the private rental space.

“The research also shows that landlords, in particular portfolio landlords, have looked to take advantage of the stamp duty holiday. We saw an increase in purchase activity in the second half of last year, and the focus is now on ensuring those purchases complete before the deadline finishes at the end of March.

“Overall, the outlook for the private rental sector remains positive, and if there is a slight correction in terms of pricing in 2021, we anticipate that professional landlords will seek to add to portfolios in order to meet the increased demand from tenants.”

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    Depends how you work out the yield, if it's on purchase price then most of mine are through the roof, even my latest purchase is 6.3%, where else would I get a return like on £80k, my top yield is 40%, but I did buy that property more than 25 yrs ago for peanuts.


    Totally agree.

    My original buy to let investment was a £6000 deposit on a £60k flat, generating £600 per month rent, Now worth around £240k and generating £1500 per month. How do you work out that yield?

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    Its amazing the yields you are getting which is why London is a disaster area & makes no sense at all and hammered by regulators. Andrew that's fantastic but we have compare like with like if you count the price back then we have to count the yield back then , rolling forward count the value now and the income now remembering money devaluation & inflation. Robert say you have a Flat worth £240k rental income of £18k pa. I have a good 3 bed HM0 licensed Flat in Acton, £ 500k rental income £1300pm x 12 = £15'600 pa so you are more than twice better off than me and probably don't need a license. I have a 5 bed house value £1m with HM0 license rental £2300 pm / £27'600. pa, so you see our yields are very poor you won't need a calculator to see the difference there + our horrendous C/Tax bands are so high adversely affecting the income, spare a thought.


    Well yes Michael that's my point the yield back then would likely have been around 6-7% similarly if we look at at the value of that property to day the yield would likely be the same


    I'm so glad that I decided not to pursue a high flyer career in London in the 70's and headed back to Scotland for a more modest lifestyle.

    I've often wondered what if I'd stuck it out and retired with a six figure pension and multi million pound property now. However I do have about £3 million equity in my portfolio and£250k gross rental income, so probably have ended up about the same but with children and grandchildren with Scottish accents instead of Cockneys!


    @ Robert Brown, didn't you just do the right thing, life isn't all about money and certainly not being a high flyer that really is a mugs game, not that I was ever going to be a high flyer, B stream at the local Secondary Modern in the 60s, hated school, started work 3 days after my 15th birthday apprentice HGV fitter, self employed since 23 and a landlord for the past 30 yrs, 3 children and 3 grand children, 16 properties, all bought and paid for and more income than I need, no regrets, you can keep the high flyer life styles

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    Andrew & Robert you the right decisions to keep away from the parasites down here they think its all milk & honey in reality they haven't a clue. I should have stayed in the North West or East midlands when I was there. Were you to have stay in London looks like you would need £9m of Property portfolio to receive a rental income of £250k gross, how difficult would that be for you to achieve if not impossible. The other advantage of what you have done for you & your family might not be apparent yet but is a great benefit. Whether at the end of the day you'll have to pay to capital gains tax or Inheritance tax or both by the look of it with this Government, your tax Bill will be on the £3m say which is a fraction of the tax on £9m you would have pay in London amounting to several millions and Bankrupting your Est'. The long & the short of it all is, its only the income that matters and the'll have that, much better placed to pass it on to your family which is what its all about in my book what do we want it for, we made enough sacrifices.


    More by luck than judgement, I actually bought most of the portfolio in my kids' names when they became students and I just take a healthy fee for managing them, so they're not part of my estate for cgt, iht or care home fees.

    I'm pretty sure my own kids will do the same for my grandkids in due course but my own estate will go straight to grandchildren with regular gifts before then to minimise any iht payments.

    It's been a long hard slog for the son and grandson of coalminers but not as long and hard as they had.

  • George Dawes

    My yield is off the charts - when the damn things are let that is , empty they’re a total liability

    Inherited them from my grandmother, the weekly rent is the same as she paid for them 50 years ago 😂

    Asset rich , cash poor. That just about sums up my dilemma....


    What use is cash George, sitting in a bank account earning 0.01%, give me assets and an income from them any day, my Properties are in and around Norwich, never have a problem renting them, in fact when they come available there is normally 3 or 4 people all wanting them.

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    Andrew it used to be like that in London before Computerization, now full of Digital Academics scammers rubbing shoulders with Council nothing will affect them. Thousands of Rent 2 Rent HM0's short / Long, multi let no problem, by the room £600. / 700 pm they love it and mug LL falls for it every time and they gets more return on nothing than the LL who owns the Property, also Rent to Lease with Purchase options another good one for mugs, Uni have special Courses etc etc but I suspect you all know this if you are not in one of those bubbles, anyway if we were doing this the Media would be all over us, but guess what not a mourner, from Media /Shelter / generation Rent, Councils and a raft of others, if its anti-private LL its very popular with Media.


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