England and Wales see falling annual rental yields: Fleet

All areas of England and Wales, except the North East, have seen a slight annual decline in rental yields, according to new data from the Fleet Mortgages Q1 2022 Rent Barometer.

While rental yields have fallen, half of the regions have seen improved yields compared to Q4 2021. Annual declines are less than 1% for all but one region.

Rental yields in Wales have seen a slight decline from 6.3% a year ago to 5.7% in the first quarter of 2022. However, this figure represents an increase of 0.1% compared to the previous three-month period, the fourth quarter of 2021.

The North East of England posted the strongest regional rental yield for the seventh consecutive quarter, rising again to 8.7%.

There has been some movement with other regions, as Yorkshire & Humberside and the North West make the top three.

Fleet suggests the change is coming from significant increases in demand around sensitive areas, which are located in and around town centers and city centers such as Liverpool, Manchester and Sheffield.

Fleet says it continues to anticipate strong demand for tenants across England and Wales through the rest of 2022.

Demand could change towards the end of the year and into 2023, as Fleet cites increases in mortgage rates, a tightening of government policies and other pressures on household incomes, as having a specific impact.

He said buy-to-let mortgage rates rose moderately in the first quarter of 2022 as lenders absorbed increased funding costs to maintain volumes.

Fleet expects rates to continue to rise in the later stages of 2022 as lenders were unlikely to continue to absorb increases in bank and swap rates.

Fleet Mortgages Commercial Director Steve Cox said: “In our previous forecast we expected demand for rental properties to remain strong through 2022, while also seeing a relative increase in mortgage interest rates, and that certainly turned out to be the direction to travel for the market.

“This strength on the demand side, coupled with relatively tight supply, means that rental yields remain strong, and overall – in England and Wales – we have seen levels rise from last year. quarter of 2021.”

“On a yearly basis, it is clear that rental yields have fallen very slightly, but this comparison by no means tells the whole story, and the shorter-term analysis should focus on the still very strong numbers fueled by demand from tenants, with future forecasts probably more or less the same, at least until the end of the year.

“Longer term, landlords are likely to have to cut their fabric accordingly when it comes to setting rents, particularly given the steep increases in the cost of living which tenants are clearly not immune to. shelter and will have to be taken into account in the rent. levels.”

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