A respectable 83% of landlords made a profit in the first quarter of 2020 – but their average rental yield dropped to an average of 5.3%, a new 10-year low.

The Mortgage Works survey of 863 National Residential Landlords Association members found one in four landlords reporting falling tenant demand, the joint highest level ever recorded. Still reeling from the coronavirus crisis, it also showed that confidence in rental yields and the private rental sector has fallen sharply – to their lowest levels in the study’s 14-year history.

Landlords owe an average of £519,000 across 5.4 buy-to-let loans and make £7,922 gross rental income from each property. However, 38% suffered rental arrears in the last 12 months, while 34% experienced a void period in the last three months – evidently a result of the pandemic.

London has been one of the most hard-hit regions by Covid-19. However, 82% of landlords in the capital are still turning a profit and pocketing gross rental income of £14,026. Central and outer London were the only areas where more than a third of landlords ran their operations as their main income.

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Void periods

According to the study, landlords in the North East are more confident about the sector and financial market than the typical landlord, however confidence in their own lettings business is the lowest of all regions at 15%. This is underpinned by the North East having an above average level of void periods and the highest incidence of rental arrears.

Meanwhile, those in the North West achieve the highest rental yield (6.3%), with perceived tenant demand also the highest of all regions (23%). Despite this strong performance, the region has seen the highest selling activity at 16% and a higher incidence of arrears and void periods, both of which are 12% above average.

Read more about the effect of Coronavirus on the rental market.

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