Thinking about becoming a landlord? One effective investment strategy is to target high-yield markets. Here are the top investor hotspots in the UK.
If you’re aiming for the highest return on your investment, understanding rental yield is crucial when buying a buy-to-let property.
Gross rental yield is the annual rental income as a percentage of the property price. Net rental yield also includes the costs of maintaining and renting out the property. Both measures can help determine if a property is a good investment.
The average gross rental yield in the UK is currently 5.60%, based on an average buy-to-let property price of £261,897 and an average rent of £1,223 per month, according to recent data.
Gross yields have improved in all regions over the past year as house prices have stabilised or decreased, while rents have continued to rise.
Remember, tenant demand and potential house price growth, among other factors, should also be considered when investing in property.
Key takeaways
- If you’re considering a buy-to-let property, rental yield can help you determine if the property’s cost is worth the potential rental income.
- Gross rental yields have risen over the last year as rents have increased faster than house prices.
- The highest yielding cities in the UK are Sunderland, Aberdeen, and Burnley, each offering average gross yields of over 8%.
- The North East is the top region for investors seeking strong yields, with an average of 7.65%.
- We reveal the three highest yielding areas in every region of the UK.
- Remember to consider other factors before investing, such as tenant demand and the potential for future house price growth.
Top cities for rental yields in the UK
Sunderland, Aberdeen, and Burnley lead the UK in rental yields, with average gross yields over 8%.
The top 17 cities for rental yields are all in the North of England and Scotland. In contrast, southern cities have higher house prices, reducing gross yields for buy-to-let properties.
Here’s a comparison of gross rental yields across UK cities.
| City | Average gross rental yield | Average monthly rent | Average price of a buy-to-let property |
| Sunderland | 8.96% | £626 | £83,842 |
| Aberdeen | 8.03% | £689 | £102,920 |
| Burnley | 8.00% | £566 | £84,869 |
| Dundee | 7.96% | £774 | £116,690 |
| Glasgow | 7.95% | £951 | £143,617 |
| Middlesbrough | 7.92% | £613 | £92,862 |
| Blackburn | 7.52% | £661 | £105,460 |
| Hull | 7.45% | £612 | £98,617 |
| Newcastle | 7.45% | £833 | £134,245 |
| Liverpool | 7.44% | £801 | £129,172 |
| Stoke | 7.38% | £735 | £119,562 |
| Grimsby | 7.16% | £608 | £101,883 |
| Barnsley | 7.15% | £684 | £114,805 |
| Bradford | 7.02% | £692 | £118,267 |
| Blackpool | 6.98% | £692 | £119,049 |
| Wigan | 6.96% | £752 | £129,656 |
| Swansea | 6.92% | £867 | £150,377 |
| Preston | 6.91% | £784 | £136,148 |
| Rochdale | 6.85% | £815 | £142,781 |
| Bolton | 6.80% | £790 | £139,483 |
| Doncaster | 6.79% | £678 | £119,911 |
| Leeds | 6.67% | £969 | £174,269 |
| Coventry | 6.66% | £1,015 | £182,782 |
| Nottingham | 6.64% | £947 | £171,146 |
| Cardiff | 6.59% | £1,119 | £203,663 |
| Wakefield | 6.56% | £737 | £134,826 |
| Birkenhead | 6.54% | £713 | £130,914 |
| Manchester | 6.53% | £1,070 | £196,603 |
| Huddersfield | 6.42% | £704 | £131,596 |
| Mansfield | 6.41% | £732 | £137,105 |
| Plymouth | 6.39% | £878 | £164,771 |
| Sheffield | 6.38% | £809 | £152,051 |
| Southampton | 6.34% | £1,121 | £212,118 |
| Newport | 6.32% | £879 | £166,835 |
| Warrington | 6.30% | £863 | £164,258 |
| Derby | 6.28% | £798 | £152,479 |
| Gloucester | 6.28% | £945 | £180,449 |
| Peterborough | 6.24% | £907 | £174,548 |
| Belfast | 6.16% | £751 | £146,190 |
| Ipswich | 6.16% | £879 | £171,273 |
| Portsmouth | 6.14% | £1,161 | £226,802 |
| Birmingham | 6.10% | £934 | £183,628 |
| Medway | 6.09% | £1,176 | £231,635 |
| Luton | 6.08% | £1,145 | £226,150 |
| Northampton | 6.08% | £977 | £192,858 |
| Edinburgh | 6.03% | £1,263 | £251,423 |
| Swindon | 6.03% | £969 | £192,908 |
| Telford | 5.92% | £809 | £164,075 |
| Norwich | 5.83% | £1,065 | £219,141 |
| Leicester | 5.77% | £924 | £192,229 |
| Bournemouth | 5.68% | £1,243 | £262,577 |
| Bristol | 5.66% | £1,389 | £294,503 |
| Hastings | 5.58% | £1,016 | £218,348 |
| Worthing | 5.52% | £1,171 | £254,618 |
| Reading | 5.48% | £1,412 | £309,293 |
| Aldershot | 5.47% | £1,325 | £290,646 |
| Crawley | 5.46% | £1,376 | £302,547 |
| MiltonKeynes | 5.41% | £1,202 | £266,589 |
| Brighton | 5.39% | £1,616 | £360,102 |
| York | 5.22% | £1,111 | £255,222 |
| Southend | 5.15% | £1,152 | £268,305 |
| London | 4.95% | £2,047 | £496,124 |
| Oxford | 4.79% | £1,667 | £417,737 |
| Cambridge | 4.50% | £1,527 | £407,603 |
Top regions for rental yields in the UK
Rents in the North East are the cheapest in the country at £695, with buy-to-let properties averaging £109,072. This gives the region the highest average yield in the UK at 7.65%.
Scotland follows with 7.48%, then the North West at 6.66%, Wales at 6.43%, and Yorkshire and the Humber at 6.38%. Gross yields in these regions have risen recently as rents have increased faster than house prices.
London has the lowest gross yields in the UK at 4.93%, only slightly higher than three months ago. Higher mortgage rates, new regulations, and slow house price growth have capped rent affordability, leading to moderated tenant demand.
The East of England and South East also have lower gross yields, at 5.28% and 5.34%, respectively. However, their yields have improved compared to last year due to the largest declines in house prices.
| Region | Average gross rental yield | Average monthly rent | Average price of a buy-to-let property |
| North East | 7.65% | £695 | £109,072 |
| Scotland | 7.48% | £793 | £127,284 |
| North West | 6.66% | £848 | £152,719 |
| Wales | 6.43% | £881 | £164,388 |
| Yorkshire and the Humber | 6.38% | £799 | £150,261 |
| Northern Ireland | 6.11% | £735 | £144,423 |
| West Midlands | 5.95% | £905 | £182,531 |
| East Midlands | 5.84% | £860 | £176,730 |
| South West | 5.37% | £1,077 | £240,472 |
| South East | 5.34% | £1,325 | £297,971 |
| East of England | 5.28% | £1,163 | £264,539 |
| London | 4.93% | £2,121 | £516,295 |
The highest yielding areas in each part of the UK
Looking for a buy-to-let property near where you live can be useful. You know the area, understand local influences on the market and can work closely with a nearby letting agent.
So it helps to know which parts of your region offer the greatest rental yield. Here are the top 3 local authorities for average yields in each UK region.
North East: 7.65% average gross yield
- County Durham: 7.81% gross rental yield
- Darlington: 7.52% gross rental yield
- Gateshead: 7.75% gross rental yield
Scotland: 7.48% average gross yield
- Renfrewshire: 9.56% gross rental yield
- East Ayrshire: 9.50% gross rental yield
- West Dunbartonshire: 9.09% gross rental yield
North West: 6.66% average gross yield
- Burnley: 8.40% gross rental yield
- Blackpool: 7.80% gross rental yield
- Preston: 7.55% gross rental yield
Wales: 6.43% average gross yield
- Blaenau Gwent: 7.58% gross rental yield
- Neath Port Talbot: 7.44% gross rental yield
- Merthyr Tydfil: 7.40% gross rental yield
Yorkshire and the Humber: 6.38% average gross yield
- Hull: 7.45% gross rental yield
- North East Lincolnshire: 7.16% gross rental yield
- Barnsley: 7.15% gross rental yield
West Midlands: 5.95% average gross yield
- Stoke-on-Trent: 7.72% gross rental yield
- Coventry: 6.66% gross rental yield
- Newcastle-under-Lyme: 6.65% gross rental yield
East Midlands: 5.84% average gross yield
- Nottingham: 7.27% gross rental yield
- Mansfield: 6.57% gross rental yield
- Boston: 6.50% gross rental yield
South West: 5.37% average gross yield
- Plymouth: 6.39% gross rental yield
- Gloucester: 6.28% gross rental yield
- Swindon: 6.03% gross rental yield
South East: 5.34% average gross yield
- Southampton: 6.62% gross rental yield
- Gosport: 6.46% gross rental yield
- Portsmouth: 6.45% gross rental yield
East of England: 5.28% average gross yield
- Great Yarmouth: 6.42% gross rental yield
- Peterborough: 6.24% gross rental yield
- Fenland: 6.17% gross rental yield
London: 4.93% average gross yield
- Barking and Dagenham: 6.22% gross rental yield
- Newham: 5.89% gross rental yield
- Bexley: 5.68% gross rental yield
What’s the outlook for buy-to-let property investment in the UK?
UK rent increases are slowing down, with annual growth now at its lowest rate in two years, dropping to 7.8% from 11% last year as demand has decreased by 20%.
Despite this, there are still over 15 enquiries for each rental property, which is twice the rate seen before the pandemic. New investment from private landlords is still low, and the average letting agent lists 12 homes for rent. This figure is 20% higher than last year but 28% below the pre-pandemic average of 16 homes.
While the gap between supply and demand is closing, it remains significant. We expect UK rental inflation to be around 5% in 2024.
The outlook for buy-to-let investment also depends on house prices, which we expect to remain stable this year. With rents generally increasing faster than house prices, gross rental yields are likely to rise in 2024.
What is rental yield?
Rental yield measures the annual income from a rental property compared to the cost of buying and maintaining it, expressed as a percentage.
Gross yield considers only the purchase cost and rental income, while net yield also includes additional costs like maintenance and property management.
When evaluating an investment property, it’s important to consider both types of yields and other relevant factors.
Why is rental yield important?
Before buying a rental property, it’s essential to determine if it’s a worthwhile investment.
If your rental income only covers your costs or you’re just breaking even, unexpected expenses like repairs can strain your finances.
Assessing the potential rental yield helps you calculate whether the investment will be profitable.
What else to think about with a buy-to-let property
Choosing a good buy-to-let property involves more than just looking at rental yield.
Even with a strong yield, if house prices aren’t rising or you struggle to find tenants, it might not be the best investment.
House Price Trends Â
Look at house price growth to see if the property is likely to increase in value. Check historic sale prices for individual properties and value changes for the postcode and local area.
Cost of a Buy-to-Let Mortgage Â
Consider the costs of a buy-to-let mortgage and other expenses associated with running a rental property.
Tenant Demand Â
Understand tenant demand in the area and the types of properties they are looking for. Speak to a letting agent to get insights into the local rental market and identify properties that could be strong buy-to-let investments.
How to work out your gross rental yield
If you want to buy a property for £200,000 and charge £1,000 per month in rent, that totals £12,000 per year. To calculate the gross yield, divide £12,000 by £200,000 and multiply by 100. This gives you a gross yield of 6%.
Formula:Â Â
(Annual rent / Property value) x 100 = Gross rental yield
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