Recent research by Howsy (lettings management platform) has revealed pockets of the UK rental market showing a strong increase in yields. The study also recorded areas that have experienced an increase in yields despite the current pandemic.
Although the UK average rental yield dropped marginally in December 2019, just prior to the pandemic (from 3.6% to 3.5%), the returns in certain areas now appear to be quite strong regardless of the challenging current conditions.
Bradford recorded the highest average rental yield at 10%, followed by Gwynedd (6.2%) and North Down (6%). Glasgow, West Dunbartonshire, North Lanarkshire, Liverpool, Preston, Forest Heath and Manchester also ranked high in the research. The areas of Kensington, Chelsea, Malvern Hills and Chiltern experienced the lowest average yields, at 2.3%.
Predictions of house prices falling while the demand for rental homes remains high, could mean further increases in buy to let (BTL) yields. Calum Brannan, Founder and CEO of Howsy, explained: “Should the property market see prices fall, the cost for investing will be lower, boosting profit margins in a sector that has had it tough of late due to government squeezes on profitability.”
Falkirk makes UK top ten in increased rental yields during pandemic
The highest increase in yields across the UK during the pandemic was recorded in North West Leicester at 1.4%. Arun, Corby and West Norfolk saw an increase of 0.8% and North Dorset, Sherwood and Newark, 0.7%. Other areas which made the top 10 for rental yield increases during the pandemic were Falkirk, Breckland, Kettering and Derby.
The largest declines in rental yields (between 1% and 3.5%) were seen in York, Gedling, Chiltern, Rhondda Cynon Taf and the Vale of Glamorgan.
Although the nation’s current conditions are extremely challenging, it has not stopped the rental market. Mr Brannan said: “(…) lockdown has seen the Government introduce measures such as buy-to-let mortgage holidays and a ban on tenant evictions has understandably caused many buy-to-let investors to hesitate. But despite this overall air of market uncertainty, tenants still need to find rental properties, and so it continues to be business-as-usual for many landlords and those agents who have adapted to a more digital mode of operations.”
“There’s also still a large number of areas where potential and existing landlords can secure favourable yields much higher than the national average, with some areas still seeing an uplift in yields despite the spread of the Coronavirus.”