Fleet Mortgages’ Q4 2021 Rental Barometer shows steady yield returns

Fleet Mortgages, the buy-to-let specialist lender, has today (19th January 2022) released the latest iteration of its Buy-to-Let Rental Barometer covering Q4 2021 rental yields across England and Wales.

The regional snapshot covers all areas of England and Wales in which Fleet lends and highlights the rental yield changes that have occurred in each of those regions. In this iteration, the yearly comparison is between Q4 2021 and Q4 2020.

Across England & Wales the Barometer shows a slight fall in rental yields, down from 6.2% a year ago to 5.6% during the last quarter of 2021, however three regions – East Anglia, West Midlands and the South East – posted a yearly increase in this iteration, compared to just one – the South East – last time.

Those regions which have seen a slight drop in rental yields over the last year, are on the whole only posting a figure slightly down on Q4 2020 – with the exception of the North West and East Midlands, in which yields are down by over 1%.

For the sixth consecutive quarter running, the North East of England has the top rental yield regional figure, dipping slightly to 7.9% but still holding onto the number one spot. However, there has been some movement in the places below, with Wales continuing to show strength with its 7%-plus rental yield, to move it into second place, just ahead of Yorkshire & Humberside.

The most significant jump over the year is in East Anglia, which has increased by 1.4% to 6.8%. Most properties financed by Fleet in the region are concentrated around the larger towns such as Norwich, Peterborough and around the outskirts of Greater London. Yields in the South East are also improving steadily – for two quarters running it has seen a positive year-on-year change.

Fleet suggests this could be as a result of changing behaviours from tenants, more working from home, and a widening of searches to incorporate larger properties and garden space outside city centres.

Fleet said it anticipates tenant demand to remain strong throughout 2022, and while existing landlords are focused on adding to portfolios, overall supply within the private rental sector (PRS) is unlikely to meet that demand.

It said prospective owner-occupiers would also continue to face supply-side issues and the PRS would continue to be required to fill the ‘housing gap’ resulting in rental yields maintaining good levels. Fleet said this view was echoed by the latest residential survey from the Royal Institute of Chartered Surveyors confirming historic low levels of supply (for sale or rent).

Steve Cox, Chief Commercial Officer at Fleet Mortgages, commented: “Our new Rental Barometer, covering the last three months of 2021, shows that rental yields are keeping pace with property prices which have risen by approximately 10% over the last 12 months. This is good news for the private rental sector and landlord borrowers.

“Three regions continue to offer 7%-plus yield and the North East retains its top spot, although Wales has shown a significant increase over the year as tenant demand continues to improve there, possibly as a result of the growing working from home trend.

“East Anglia has posted the biggest year-on-year increase, while conversely both the North West and East Midlands fell by the most. However, these drops are from points above a 7% yield and again we anticipate they will stabilise as the year continues.

“In terms of how this might impact landlord activity, it looks increasingly positive for 2022 particularly as professional investors review the recent capital increases in their properties and make the most of them via refinancing in order to secure the deposits required for new purchases.

“2022 has been described as a big year for remortgaging in the buy-to-let space, and that looks highly likely, but it will be remortgaging with a reason for existing landlords, who tend to capital raise in order to secure the funds they need for portfolio growth.

“With these yield figures showing a strong yearly return possible across most regions of the UK, and with house prices likely to continue on an upward trajectory due to a continued lack of supply, property investment and buy-to-let is likely to retain its allure.

“This is good news for advisers active in this space, and their clients, who are going to benefit from a highly competitive finance market and access to lenders like Fleet who have a strong appetite to lend right across the piece.”