Rental yields bouncing back in the South

Northern England and the Midlands have provided investors with the strongest rental yields in recent years but with rent rises outstripping property prices the South is starting to close the gap.

Hamptons analysed the areas where most homes were bought by investors this year and where rental yield have risen, finding a strong link between the two.

Most investor purchases were in the Midlands and the North, accounting for 14 of the top investor hotspots. However all of the other 6 were in the South East, up from just 2 a year ago. Barking and Dagenham are the South's leaders, where 31% of properties sold were bought by investors.

Hamptons expect this trend to continue for at least the next couple of years, with modest house price growth being outstripped by rising rents, gradually closing the yield gap with the North.

The most dramatic effect of the reopening has been seen, unsurprisingly, in central London. Data specialists LonRes report a 12% increase in rents over this time a year ago, driven largely by a shortage of available rental stock, now 38% lower than pre-pandemic levels.

LonRes said “Looking ahead we expect low stock levels to result in further increases in achieved rents over the coming months. And with rental growth outpacing increases in sales prices, rental yields could rise further too.”

London's outer boroughs are also showing a strong recovery, with rental increases reaching an annualised 6.8% in Q3.