According to data from Paragon Bank, average gross rental yields for landlords in the United Kingdom surpassed a significant mark in the second quarter of 2026, reaching 7.02%. This increase is largely attributable to the performance of Houses in Multiple Occupation (HMOs). The figures released represent the last quarterly data available before the introduction of the new Renters' Rights Act.
Detailed analyses show that the HMO property sector is demonstrating robust performance. Landlords who have invested in this area have been able to achieve above-average returns, underscoring the attractiveness of multi-occupancy properties in the current market environment. The profitability of this property class is boosted by high demand and efficient use of living space, particularly in urban areas and university towns.
Impact of the new tenancy law
The timing of the data release is noteworthy, as it covers the last full quarter before the Renters' Rights Act comes into force. This new legislation is expected to have significant implications for the private rental sector. Experts are keenly observing how the legislative changes will affect landlords' investment decisions and the dynamics of the rental market. It is anticipated that regulations concerning tenancy agreements and evictions, in particular, will require adjustments from market participants.
For investors, this means an increased need to familiarise themselves with the new provisions to ensure compliance and continue to achieve favourable returns. Despite the impending changes, the United Kingdom remains an attractive market for real estate investments, particularly in segments that, like HMOs, serve high demand and can thus generate stable income. The ability to adapt to new frameworks will be crucial for success in the coming quarters.
The development of rental yields in the UK property market continues to be closely monitored. The performance of HMO properties in the second quarter of 2026 sends a clear signal about the resilience and potential of this specific sector, even within a changing regulatory environment. Paragon Bank's analysis highlights the necessity of a differentiated view of the market to accurately assess the opportunities and risks of individual segments.
