Yields rise in areas where rents outstrip capital appreciation

Rental yields have increased by as much as 2.5 per cent in the past year as rent values outperform house prices. 

The current average UK rental yield is 4.08 per cent. This marks a 0.19 per cent increase over the past year. 

A new analysis by Sirius Property Finance has identified yield data on a postcode level and found that some regional numbers dwarf this UK average. 

Today, the UK’s highest rental yields are being generated in the BD1 postcode region of Bradford at 11.06 per cent. In the Leeds postcode district of LS2, yields currently average 10.05 per cent, while in Manchester’s M14, they stand at 9.41 per cent. 

This northern dominance continues with Leeds’ LS4 on 9.18 per cent before the Midlands enter the picture with Nottingham’s NG7 on 8.96 per cent and Birmingham’s B29 on 8.57 per cent. 

In Wales, Rhondda Cynon Taff’s CF37 enjoys a yield average of 8.54 per cent and Swansea’s SA1 is on 8.52 per cent.

Across all of but one of these examples, yields are being bolstered by the fact that rent prices have increased significantly more than house prices. In Bradford, for example, the average house price is up 11.1 per cent while the average rent has grown by 22.8 per cent. 

In terms of largest annual yield growth - as opposed to absolute yield - Exeter’s EX4 tops the list with an increase of 2.56 per cent in the past year bringing the current average to 6.52 per cent. 

Sirius head of corporate partnerships, Kimberley Gates, says: “Rent values have continued to climb over the past year and already high demand is set to get even higher as more and more potential buyers are put off crossing over into the sales market by recent economic instability and the rising cost of living. 

"As such, while rents have shot up, house prices have seen marginal drops in recent months. 

“However, it’s important to acknowledge that while mortgage rate hikes and the cost of living crisis have indeed helped generate higher yields, landlords are also tackling increased costs just like everyone else. 

"These higher portfolio running costs negate some of the yield increases we’re seeing and should be carefully considered when thinking about investing in new properties.”