Nationwide trend towards more flexible tenancy options

Landlords have been pleased to see that rental yields held firm in the fourth quarter (Q4) of 2022. Despite the turbulent housing marketing and economic challenges brought on by the pandemic rents remained strong.

This has been driven largely by a nationwide trend towards more flexible tenancy options as people increasingly look for shorter-term rentals and greater flexibility. This shift towards more ‘demand-driven’ leasing has helped to maintain and even increase rental yields in certain areas of the country where there is a strong demand from tenants.

TENANT DEMAND

According to research, rental yields and tenant demand showed that rental yields softened only by 0.1% to an average of 5.7% across the country in Q4 2022[1].

Welsh rental properties secured the highest yield figures at 6.4%, while Houses in Multiple Occupation (HMO) properties returned to the top spot offering the strongest yield by property type at 6.4% for the quarter, followed by multi-unit blocks at 6.2%.

LANDLORDS’ PERCEPTION

Despite net demand remaining stable at 65%, landlords’ perception of tenant demand varied regionally in Q4, with Central London landlords reporting the highest strength of current tenant demand. However, demand appears to have fallen on a net basis across several regions, including the North West, West Midlands, South East and Outer London. The study also revealed that 81% of landlords said they were making a profit from their letting activity, and those who owned four to five properties (90%) reported making a profit.

CONTINUED PROFITABILITY

The research suggests that many landlords may raise rents this year due to increased costs such as higher mortgage costs and low supply of properties in the private rented sector, while also realigning their properties for local marketing to ensure continued profitability.

Overall, the UK rental market remains strong despite wider economic uncertainty and it seems likely that rental yields will continue to hold firm as long as there is demand from tenants for short-term rentals with flexible terms.

RENTAL YIELDS

Landlords should therefore feel confident that their investments will remain profitable and offer a reliable income stream into the future.

With this in mind, it is clear that now is an ideal time for landlords to make long-term rental commitments and plan for the years ahead. With help from expert mortgage advice and careful planning, investors can be sure that their rental yields remain strong despite ongoing economic uncertainty.

Don’t forget, our professional friendly advisers are on hand to support you and can help you explore all of your options.

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