Weekly Property Newsletter

Revealed – Rental Yields in Different Regions of England and Wales

Recent analysis from Paragon Bank reveals key insights into rental yields across England and Wales. For landlords looking to maximize returns, the Northeast, Northwest, and Yorkshire & Humber regions offer the highest rental yields, surpassing southern counterparts.

• Northeast: Topping the list, landlords in the Northeast are achieving average yields of 8.13%, thanks to the region's affordability and strong rental demand.
• Wales: A close second, yields in Wales average 8.07%, presenting an attractive option for investors.
• Northwest: Securing third place, the North West boasts an average yield of 7.84%, solidifying the north’s dominance in the buy-to-let market.
• Yorkshire & Humber: With yields of 7.54%, this region continues to outperform the national average of 7.17%.

These northern regions offer compelling opportunities for landlords, driven largely by the affordability of property in these areas. In fact, an Office for National Statistics (ONS) report highlighted that the Northeast, North West, and Yorkshire & Humber have some of the most affordable local authorities in 2023.

In contrast, London remains the least affordable region, with 80% of local authorities having house prices more than 12 times the average salary, making it less attractive for rental yields.

House Prices on the Rise – What to Expect Before the Budget

UK house prices continue to rise, nearing a record high. According to Halifax, the average UK house price is currently ￡293,399, just slightly below the all-time high seen in June 2022. Falling mortgage rates and strong wage growth have bolstered buyer confidence, leading to a 40% increase in mortgage agreements over the past year.

This trend is expected to persist, but the upcoming Budget could shift the landscape. With increased mortgage availability and lower rates—now hovering around 4%—homebuyers are finding it easier to access properties that were previously out of reach.

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Capital Gains Tax Hike Fears – One Million Homes Could Be Sold

A potential rise in capital gains tax (CGT) is creating anxiety in the property market. Reports suggest that Chancellor Rachel Reeves is considering aligning CGT with income taxes, which could lead to a mass exodus of landlords. Research from Capital Economics warns that one million rental homes could be sold within the next decade if this tax hike is implemented.

Currently, landlords face a 24% CGT rate when selling property but aligning it with income tax could push this up to 45% for higher-rate taxpayers. This looming threat has landlords reconsidering their positions, especially given recent hits from the removal of mortgage interest relief and the 3% stamp duty surcharge.

Landlords may rush to sell properties ahead of any changes, potentially shrinking the rental market and reducing supply, which could drive rents up for tenants.

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Key Takeaways for Landlords and Investors:

• Northern England continues to offer the highest rental yields, particularly in the Northeast, Northwest, and Yorkshire & Humber.
• The current property market remains strong with rising house prices, but the upcoming Budget could bring changes that may affect both buyers and landlords.
• Potential tax hikes, including an increase in CGT, could significantly impact landlords, prompting many to sell off rental properties.

It’s a dynamic time in the property market, so staying informed and planning ahead is key to maintaining a successful investment strategy.

I hope this newsletter offers valuable insights for you as a property investor! Feel free to reach out with any questions or for more detailed advice on how to navigate the current market trends.

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