Rental block B2L yields reach all-time high

Sarah Davidson

January 20, 2015

This is the highest figure ever recorded for the property type, overtaking yields on houses in multiple occupation (HMOs), which reached 9%.

Yields on non-standard properties compare favourably to ‘vanilla’ buy-to-let properties, which achieved an average 6.3% in quarter four 2014, up from 5.9% in the third quarter.

David Whittaker, managing director of Mortgages for Business, said: “Rental yields for HMOs and MUFBs are typically higher than those for vanilla buy-to-let.

“For a multitude of reasons, not least stagnant wage growth for half a decade, many tenants simply can’t afford an enormous flat with a spare bedroom.

“As such, the attraction for many of renting a room rather than whole property will ensure that there is a steady yield-boosting demand for HMOs over 2015.”

The only property type which saw yields fall was semi-commercial, as yields stood at 6.4% in quarter four compared to 9.7% in the third quarter.

Average loan to values fell to 64% on MUFBs, 64% on HMOs and 63% on vanilla buy-to-let in quarter four 2014.

Whittaker added: “While property prices have slowed a little in recent months, landlords have on the whole seen enormous price growth compared to the indecisive direction of property prices a few years ago.

“Looking ahead, this might spur some landlords to expand their existing portfolios further and diversify as a result of the high yields on non-standard properties.”

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