Anticipating UK Yield Growth for Buy-to-Let Investors in 2024

Fleet Mortgage's Q4 data reveals a deviation from the trend seen in the past two quarters, with three regions experiencing a slight decline in average annual rental yields. Despite a robust overall yield of 6.9%, specific areas like Wales, the North West, Yorkshire, and Humberside have seen notable increases, likely due to persistent supply shortages compared to tenant demand.

Looking forward to 2024, there's an expectation of a minor decline in rents from their current highs. The imbalance between potential tenants and available properties is likely to persist as many buyers await lower interest rates before entering the market.

Challenges faced in 2023, especially regarding landlords expanding portfolios due to a substantial rise in mortgage rates, have eased in recent weeks. Improved mortgage lending, lower rates, and meeting affordability criteria may facilitate easier entry into the property market for some investors this year.

Fleet's analysis suggests that heightened landlord activity typically occurs when mortgage rates hover around 5.0%. Given the current trajectory, increased buying activity may transpire if landlords navigate existing housing supply issues. Additionally, potential government announcements of favorable pre-election buy-to-let stamp duty regulations in the March Budget could further stimulate activity.

While a significant surge in buy-to-let activity isn't anticipated, the beginning of the year has been more favourable compared to the challenges witnessed in the spring and summer of 2023. There is a greater potential for increased activity compared to most of the previous year.