introduction
Rental yields in the real estate market have surged to a 10-year high, with landlords reporting an average yield of 6.3% in the second quarter of 2024, according to Paragon’s PRS Trends Report. This significant increase reflects a strong recovery from the 15-year low of 5.2% recorded in early 2023.
Investment opportunities
Yields have not reached this level since 2014, showing consistent growth throughout the year. Richard Rowntree, Managing Director of Mortgages at Paragon Bank, emphasised the positive impact this has on the buy-to-let market, highlighting it as a crucial indicator of the sector's overall health.
Larger Portfolios and Limited Companies Drive Higher Real Estate Yields
The data reveals that landlords with larger portfolios of 11 or more properties saw better returns, with average yields of 6.9%. Similarly, real estate investors utilising limited company structures achieved similar results, suggesting that strategic portfolio management can enhance returns in the buy-to-let market.
HMOs Deliver the Highest Real Estate Yields
Houses in multiple occupation (HMOs) continue to lead the market, offering the highest average rental yields of 7.2%. This makes HMOs a particularly attractive option for investors seeking higher returns in the real estate rental sector.
conclusion
As rental yields reach their highest point in a decade, the real estate market presents strong opportunities for buy-to-let investors. Whether focusing on expanding portfolios, leveraging limited company structures, or investing in HMOs, the outlook for rental income remains robust.
