Average Rental Yield UK (2024)

Average Rental Yield UK

According to research from PropertyData.co.uk, the estimated average rental yield in the UK stands at 4.75%. Rents in the UK have increased drastically over the last few years as more and more people are in need of rental property. This demand is a result of many factors, one of which is the house price growth in the UK. House prices are rising at a rapid pace at the moment, pricing many people out of making the leap into homeownership and resulting in more and more people relying on rental property.

However, attitudes towards renting are constantly changing and there are now many who choose to rent a property as opposed to buying, thanks to the flexible lifestyle on offer with a rental property. All of these factors are coming together and putting pressure on the rental market, forcing rents to rise and, in turn, rental yields to do so as well.

What does rental yield mean?

A rental yield is the return on investment per year expressed as a percentage. The two types of yields you will receive are gross yields and NET yields.

What is the difference between NET yields and gross yields?

In simple terms, gross yield is the value of your returns before you deduct all associated costs and a NET yield is the value when all the associated costs have been deducted.

How do I calculate gross and NET yields?

Working out gross and NET yields are very straightforward. To work out gross yields, you simply have to divide the gross annual rent by the value of the property and times it by a hundred. To work out the NET yield, you have to do the same but also consider any deductions from the annual rent (i.e. ground rent, service charge etc).

What does it mean by ‘assured NET yields’?

Assured NET yields are a rental assurance that developers offer landlords for a specified fixed period (usually for one year, two years or five years). This means that rental income will be assured on the property for the specified period, regardless of whether the property is tenanted or not.

What is a good rental yield in the UK?

The current average rental yield in the UK is between 3-5% NET, so anything above this would be considered good. Higher yields can usually be found in Northern cities like Manchester, Liverpool and Sheffield.

4.75%

The estimated average rental yield in the UK is 4.75% (PropertyData.co.uk, 2023)

4%

The UK annual private rental price growth rose by 4% in the 12 months to November 2022 (ONS, 2023)

£969

Renters are now paying on average £969 per month (Zoopla, 2022)

15.9%

Rental values in the UK are forecast to increase by an impressive 15.9% in the 2023-2027 period. (JLL, 2022)

Why are Rental Yields Important?

The primary and most consistent way a landlord makes an income through a buy-to-let property is through the rent you receive from tenants. A rental yield is that figure expressed as a proportion to the price paid for the property and, as a result, is a helpful metric to measure how cost-effective your investment has been in the short and long term.

Before purchasing a buy-to-let property, it is important to find out what kind of rental yield you can expect on your property and compare this to the local area to first, ensure you are receiving a strong return in relation to the property price, and second, identify if there is any potential to increase your rental income.

As mentioned above, the current average rental yield in the UK is between 3-5% NET, but there are higher returns on offer in numerous locations throughout the country.

Why Should You Invest in Rental Property?

Investing in a rental property is one of the best ways not just to protect your wealth, but actually, increase it and earn a consistent income whilst doing so. The incredible performance of the UK property market in particular has been covered extensively over the last couple of years, and for good reason too.

House prices in the UK increased by over 10% for 2 years in a row, whilst rents consistently reached record highs of over £1000pcm. Whilst this impressive house price growth is set to slow down and return to a more stable and sustainable pace throughout 2023, rents are showing no sign of slowing down. This offers investors the chance to benefit from even greater rental yields when they invest in buy-to-let property.