Scotland, West Midlands and Yorkshire lead growth

Scotland, West Midlands and Yorkshire led yield growth in the second quarter, with strong performance in those regions driving up overall gross rental yields to 7.02% by the end of June, up from 6.96% at the end of Q1 and 5.84% in 2021.

Paragon Bank’s Q2 Buy-to-Let Yields Report data showed that by region Scotland saw the strongest growth over the quarter, rising by 53 percentage points (pp) to 7.97%. Yields in the West Midlands rose 24pp to 7.24%, while landlords in Yorkshire & Humber saw yields increase by 21pp to 7.58%.

However, the sharpest decline was in Greater London where yields fell 16pp across the quarter to 5.58%.

Wales strongest yielding

Wales remains the strongest yielding location at 8.87%, while Scotland is now joint second in the list with the North East, at 7.97%. London (5.58%) and the South East (6.48%) remain the lowest yield performing areas.

HMOs continue to deliver the strongest yields of 8.90%, up 14pp, followed by multi-unit blocks at 7.18%. Flats (6.45%) and terraced housing (6.31%) also scored highly from a gross rental yield perspective.

Louisa Sedgwick, Paragon Bank managing director of mortgages, said: “The second quarter saw a further strengthening in gross rental yields, continuing the positive trajectory we have seen in recent years. While the pace of movement varies across regions, the overall picture remains one of resilient returns for landlords, supported by sustained tenant demand and more subdued house price growth in parts of the market.”