HMO properties are now typically producing yields of 8.9%, the Complex But to Let Index from Mortgages for Business has found.
This is the first time yields have fallen below 9% since the index was launched in 2011.
Jeni Browne, sales director at Mortgages for Business, said: “The attractiveness of HMOs as a buy-to-let investment has increased in recent years not only because of the higher yields on offer but because serious investors are keener to diversify their portfolios.
“With more landlords vying for these properties, prices have been pushed up more quickly than the rents which, I would suggest, is one of the main reasons we are seeing their yields drop, although, I suspect that the granting of fewer new HMO licences is also having an impact.”
Multi-units, such as blocks of flats, generated yields of 8.1% compared to 8.3% the year before.
Vanilla properties produced yields of 5.6%.