At Dendrow Estate Agents, we provide the latest insights to help you make informed decisions about your property investments. Today, we’re diving into an exciting development in the UK rental market: rising rental yields. This is particularly good news for landlords across the country, as it highlights a robust and growing demand for rental homes.

Understanding the Current Rental Yield Landscape

As of December 2024, the UK rental market continues to see strong growth. The national average rental yield has increased to 6.72%, up from 6.69% in the previous quarter and 6.48% a year ago. Properties like Houses in Multiple Occupation (HMOs) are offering particularly high yields, averaging 8.34%, followed by freehold blocks (6.66%), flats (6.02%), and terraced houses (5.94%).

This steady growth in rental yields can be attributed to several factors, including limited supply, steady property prices, and increased tenant demand. These conditions have created a prime opportunity for landlords to maximize their returns, especially in areas where supply remains constrained.

Regional Variations in Rental Yields

Location plays a critical role in rental yield performance. Landlords in Northern England, including the Northeast and Cumbria, lead the pack with yields averaging 8.02%. Wales follows closely at 7.95%. Conversely, Greater London sees lower yields of around 5.52%, primarily due to the higher property prices relative to rental income.

Despite this, London remains a hotspot for rental demand, and with forecasts suggesting a recovery in property prices, yields in the capital could improve. For investors, this means balancing the potential for capital growth with the income provided by rental returns.

Forecast for Spring 2025

Looking ahead to spring 2025, rental growth is expected to remain strong. Nationally, rental prices are projected to increase by 4.5% in 2025, according to recent forecasts. This follows consistent growth seen in 2024, driven by high tenant demand and limited rental property supply.

Central and Greater London are expected to see even higher rental price increases of 4.0% to 5.0%, driven by growing demand for urban living and a return of young professionals to city centers. Supply constraints caused by regulatory changes, such as stricter EPC (Energy Performance Certificate) requirements and the potential effects of the Renters’ Rights Bill, may also reduce the number of rental properties available, further driving up rents​

Opportunities for Landlords and Investors

With rental yields outpacing house price growth, the UK rental market presents a compelling opportunity for investors. Higher mortgage costs and evolving property regulations are encouraging some landlords to exit the market, creating a tighter supply. This, in turn, supports higher rental returns. The period from 2024 to 2028 is expected to see cumulative rental growth of 18.8% nationally, with even higher growth of 21.7% projected in Central London​

What This Means for You

If you’re a landlord or property investor, now is the time to assess your property portfolio. Rising rental yields, especially in HMOs and in high-demand areas like Northern England and Wales, present opportunities for better returns. Meanwhile, the forecast for spring 2025 suggests further rental growth, offering the potential for both short-term gains and long-term resilience.

At Dendrow Estate Agents, we are here to help you navigate these changes. Our team can offer insights on rental trends, investment strategies, and market analysis. Contact us today for expert advice on how to make the most of the current rental landscape.