Yields from rental property in the private rented sector are experiencing marginal dips since the ban on charging fees to tenants was introduced in June 2019, fresh research has discovered.
The latest research from Howsy, the letting management platform, has shown that rental yields across England have reached an average of 4.08 per cent. This is a decrease of 0.13 per cent, when compared with the identical time period in 2018, and before the ban on tenant fees was implemented.
The capital has experienced the largest decline in rental yields, which have dropped an average of 0.18 per cent since June 2018. However, not all regions have experienced such stagnant activity, and there are some signs of growth in certain regions in the UK. According to the research, Newcastle-under-Lyme is experiencing the most positive growth in rental yields since the ban on tenant fees, with the average yield increasing by 0.49 per cent to 5.01 per cent this year.
The city of Exeter has also experienced significant improvements in rental yields, which have increased by an average of 0.42 per cent. Meanwhile Plymouth, Westminster and Oxford have all seen increases in average rental yields of 0.30 per cent, 0.37 per cent and 0.34 per cent respectively. Meanwhile, the City of London, the Chilterns and South Oxfordshire have all seen increases of 0.33 per cent.
Doncaster, the Yorkshire town, also saw good increases of 0.22 per cent, while Runnymede, West Oxfordshire, the City of Bristol and Norwich all saw rental yield increases of 0.20 per cent. Forest Heath and Bournemouth were placed at the bottom of the table, with rental yield growth of 0.19 per cent after the ban on tenant fees.
Within the capital’s boundaries, Sutton, Bexley and Camden have experienced some of the most extreme positive movements in rental yields in the private rented sector, with increases of 0.09 per cent, 0.10 per cent and 0.13 per cent respectively. Hillingdon, Croydon and Havering also performed well, with growth in rental yields of 0.03 per cent, 0.06 per cent and 0.08 per cent respectively. However, Wandsworth and Haringey saw no movement in rental yields after the ban on tenant fees was introduced.
Regionally, the South West has seen the biggest growth in rental yields, with a 0.06 per cent increase after the ban on tenant fees. However, England overall saw a decrease in rental yields of 0.13 per cent after the Act was introduced. The North East region saw the biggest decrease in rental yields, with an average drop of 0.25 per cent after the ban on charging tenant fees.
Founder of Howsy, Calum Brannan, explained that it was widely believed within the sector that the tenant fees ban would be the last straw for many buy to let landlords who were already facing tough times due to changes in regulation. While the profitability at the top line for landlords appears to have slightly stuttered, the research shows that the sector is nowhere near collapse.
In fact, the diverse landscape and resilient nature of the rental sector in the UK has meant that plenty of buy to let landlords have actually experienced improvements in rental yields. Although there may be only marginal growth at present, there are many positive signs that the rental market is getting better, especially when considering the short time period that these changes in rental yields have been noted.
As in all investment markets, the key to success in the buy to let sector is to understand the market thoroughly and to pick the right options when they arise. It is clear from the research that bricks and mortar remains a very wise and sound investment. Conducting a property inspection ensures that buy to let homes are secure and well looked after.
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