Gross rental yields stable in October while tenant arrears decrease

Gross yields for rental properties in England and Wales remained stable in October, the latest Buy to Let Index has revealed.

According to the data, gross yields for the average UK property were 5.1 per cent in October 2014, the same as a month previously. However, this figure represents an annual fall of 0.3 per cent as yields in October 2013 reached 5.4 per cent thanks to a booming buy to let market.

The Index from Your Move and Reeds Rains showed that when price growth and void periods are taken into account, total annual returns on an average rental property are 13.3 per cent for the 12 months to October – costs such as maintenance and mortgage repayments are not included in this figure. This represents a return to the highest recorded level, last seen in August 2014, while the figure for the preceding 12 months to October 2013 was 8.2 per cent in comparison.

In real terms it means the average landlord in England and Wales has seen a return – before deductions – of £22,434 in the last 12 months. This is comprised of rental income of £8,404 and average capital gains of £14,030; although maintenance costs and mortgage payments would need to be deducted.

An overall improvement in tenant finances was also noted in October, with 6.9 per cent of all rent in arrears, down from 7.2 per cent in September and 7.1 per cent a year ago. Currently, rental arrears are only 0.3 per cent above the record low of 6.6 per cent seen in November 2013. In absolute terms, late rent represented £244 million in October, down from £256 million a month previously and a drop of £12 million month-on-month.

Levels of severe tenant arrears have also improved according to the latest quarterly Tenant Arrears Tracker as those facing rental arrears of more than two months now represent 1.4 per cent of all tenancies down from 1.6 per cent for the third quarter in 2013.

To see more information about past trends and data across a variety of properties and the whole industry please visit our Complex buy to let Index research data.