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Profitability, yields and increasing rents
The latest Pegasus Insight Landlord Trends research for Q4 2024 brings positive news for the intermediary market, highlighting landlords' continued resilience despite lingering economic pressures. The data points to encouraging levels of profitability, robust rental yields, and a persistent trend of rent increases to help landlords navigate an ever-evolving buy to let landscape.
Profitability
Profitability remains a key strength for landlords, with 86% reporting they profit from their lettings activity. Notably, there has been a 4% uplift in those making a 'large' profit, now at 20%, while 66% report making a 'small' profit. Only 6% of landlords are experiencing a loss, which remains low and stable.
Rental yields
Landlords continue to achieve impressive rental yields, with the average yield at 6.4%, close to the 10-year high recorded in Q3 2024. The most profitable landlords tend to operate at the more complex end of the buy to let sector, with whole block owners and landlords of HMOs achieving yields of 7.1% and 7.0%, respectively. Regional variations are also noteworthy. The North West currently leads the way with the highest average yield of 7.1%, while Central London landlords report the lowest at 5.5%.
Rents
Three-quarters of landlords are suggested to have raised rents in the past year, and 62% plan to do so again in the next 12 months, particularly those with buy to let borrowing (70%).
Higher portfolio running costs remain the primary driver of these increases, with inflation, taxation, and mortgage repayment costs also playing a role. Interestingly, 40% of landlords with 20+ properties plan to raise rents to fund 'green' retrofit improvements, indicating a growing focus on sustainability.
Despite rent increases, 82% of landlords believe they are letting at least one property below market value. Larger landlords with 11+ properties report subsidising an average of 12.8 properties at £120 each per month, amounting to a total monthly loss of £1,536.
Within a stable and profitable market, opportunities remain for proactive intermediaries to help landlords optimise borrowing strategies, secure competitive buy to let mortgage rates, and successfully navigate evolving market trends successfully.
For intermediaries only
