Average UK Buy-to-Let Yield Jumps to 5.8%

Define:

Rental Yields

A ‘rental yield’ is the yearly rental income of a property divided by its total purchase price. This percentage helps investors calculate their potential return on investment through rent. Factors like a changing housing market, property prices, interest rates and demand can all affect rental yields.

The two yields investors can explore are gross yields and NET yields. The gross yield is the value of your returns before you take away all additional costs. The NET yield is the value when all major costs have been deducted.

To calculate:

For example, If an investor buys a property for £200,000 and has an annual rental income of £12,000 the gross yield is 6%. 

Rent: £1000 PCM

(Rent PCM x 12 months) / (purchase price) = gross yield%

12,000 / 200,000 = 6%

Growing Rents...

A Higher ROI

The rise in average rental yields is in direct correlation with escalating rental prices. Landlords are charging tenants higher rents and consequently yielding a larger return on investment. Despite the growth in the rental market, rents in the North remain considerably lower compared to in the South.

Consequently, tenants in the North are still willing to pay above-average prices as they represent some of the most affordable options in the UK. In addition, ongoing regeneration schemes in the North are enhancing the desirability of the region, with a range of amenities conveniently placed. Data shows more buyers are now willing to move further away from their home area to buy their desired house and live in a place with easy accessibility.