The highest yielding areas for buy-to-let property in the UK

Considering becoming a landlord? One strategy for investment is to focus on higher yielding markets. Here are the top investor hotspots in the UK.

Ready to become a landlord and want the biggest return on your investment?

It’s worth getting to grips with rental yield if you’re purchasing a buy-to-let property.

Gross rental yield is the annual rental income expressed as a percentage of the property price. Net rental yield also factors in the cost of maintaining and renting out the rental property. Both can help you decide if a property is a good investment.

Keep in mind that tenant demand and the potential for house price growth - among other factors - should also be considered with property investment.

The average gross rental yield in the UK is currently 5.49%. The average buy-to-let property costs £262,288 and the UK’s average rent is £1,201.

Yields have improved across all regions in the last year as house prices have started to fall and rents have continued to rise.

10 top cities for rental yields in the UK

Sunderland, Dundee and Burnley top the chart for the highest rental yields in the UK, with average gross yields of close to or higher than 8%.

Cities in the North of England and Scotland are generally better for yields than the South of England and London. This is because house prices are disproportionately higher than rents in these southern locations.

Glasgow and Liverpool also make our list with gross yields of 7.90% and 7.43% respectively. These cities provide attractive opportunities for property investors due to their relatively low average house prices, excellent employment prospects and large student populations.

Here are the top 10 cities for rental yields right now.

Top regions for rental yields in the UK

When it comes to regions, the top places for rental yields are all northern.

Rents in the North East are cheaper than anywhere else in the country (£671) - but so are buy-to-let properties, at £109,715 on average. This gives the region the highest average yield in the UK of 7.34%.

It’s followed by Scotland (7.32%), the North West (6.52%), Northern Ireland (6.24%) and Wales (6.23%).

London offers the lowest gross yields in the UK of 4.92% on average. With higher mortgage rates, new regulations and low house price growth in recent years, landlord investment in the city has been limited. Particularly as rents appear to have reached an affordability ceiling and tenant demand is starting to moderate.

The South East and East of England also offer lower gross yields of 5.17%. These are the two regions where house prices have fallen the most, which has improved their rental yield from between 4.50% and 5.0% a year ago.

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 local area, understand local influences on the market and can work closely with a local letting agent.

And 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

• Middlesbrough - 8.52% gross rental yield

• Sunderland - 8.50% gross rental yield

• Hartlepool - 8.31% gross rental yield

Scotland

• East Ayrshire - 9.57% gross rental yield

• West Dunbartonshire - 9.15% gross rental yield

• Renfrewshire - 9.13% gross rental yield

North West

• Burnley - 8.41% gross rental yield

• Liverpool - 7.57% gross rental yield

• Hyndburn - 7.47% gross rental yield

Wales

• Blaenau Gwent - 7.38% gross rental yield

• Neath Port Talbot - 7.23% gross rental yield

• Merthyr Tydfil - 7.22% gross rental yield

Yorkshire and the Humber

• Hull - 7.30% gross rental yield

• North East Lincolnshire - 7.07% gross rental yield

• Barnsley - 7.02% gross rental yield

West Midlands

• Stoke-on-Trent - 7.09% gross rental yield

• Newcastle-under-Lyme - 6.52% gross rental yield

• Coventry - 6.46% gross rental yield

East Midlands

• Nottingham - 7.06% gross rental yield

• Mansfield - 6.40% gross rental yield

• Boston - 6.39% gross rental yield

South West

• Plymouth - 6.32% gross rental yield

• Gloucester - 6.20% gross rental yield

• Swindon - 6.06% gross rental yield

East of England

• Great Yarmouth - 6.13%

• Fenland - 6.05%

• Peterborough - 6.04%

South East

• Southampton - 6.42% gross rental yield

• Gosport - 6.10% gross rental yield

• Portsmouth - 6.09% gross rental yield

London

• Barking and Dagenham - 6.24%

• Newham  - 5.78%

• Bexley - 5.62%

What’s the outlook for buy-to-let property investment in the UK?

Tenant demand is a third higher than the 5-year average while supply is limited by low new investment. We expect rents to rise between 5% and 8% next year as there is still affordability headroom across most of the country.

There is also further for house prices to fall. If house prices are falling and rents are rising, gross yields will continue to improve.

However, there are signs that the rental market is about to turn and we have already passed the peak of rental growth. We expect annual UK rental growth to halve to 5% to 8% during 2024, the lowest growth since 2021.

There are already signs that rental demand is weakening. Influencing factors include the ending of one-off pandemic after-effects, slower jobs and wage growth, and mortgage rates dropping since a year ago.

Key takeaways

• If you’re looking for a buy-to-let property, rental yield can help you decide if the cost of the property is worth the potential rental income
• Rental yields have improved in the last year due to falling house prices and increasing rents
• The highest yielding cities in the UK are Sunderland, Dundee and Glasgow, which offer a gross rental yield of between 7.7% and 8.4%
• The North East is the best best for investors looking for strong yields, offering an average of 7.15%
• We reveal the three highest yielding areas in every region of the UK
• Take other factors into account before you invest, like tenant demand and the potential for future house price growth

by Blackstones

The cheapest places to rent a home in 2023

Renters will be pleased to learn the UK rental market has now passed its peak rate of growth. So where are the cheapest places to rent right now?

The cost of renting a home has risen rapidly over the last three years due to a chronic shortage of supply.

Rental prices have increased by a third in that time, adding £3,360 to the average renter’s bill.

But in good news for renters, we’re anticipating a major deceleration in prices for new lets during 2024.

The cost of new lets has now reached the ceiling of what renters are able to afford.

This will lead to a slowdown in demand and a gradual increase in the availability of homes to rent.

Our Executive Director of Research, Richard Donnell, says: ‘There are already signs asking rents have overshot in some markets showing resistance to higher rents.

‘Our data shows that rental demand has been steadily losing momentum over second half of 2023.

'This is illustrated by the number of enquiries per home for rent. This measure peaked at over 35 enquiries per property in the summer of 2022.

'There was a seasonal peak this summer, but to a lesser degree. We are now in the usual seasonal slowdown that will extend into Q1 2024.’

London to lead the way in reducing rents

One third of the UK’s rental homes are based in London and it's set to lead the way in reducing the price of new lets next year.

The capital is the most expensive place to rent a home in the UK and prices for new lets here have already hit the ceiling for renters.

A year ago, rents here were rising at a rate of 17%. Today, that rate has dropped to 9.7%.

Across the rest of the UK, rents were rising at 11.9% a year ago. Today they are also rising at 9.7%.

In 2024, average UK rents are expected to rise by 5%, the lowest growth rate since in 2021.

Scotland bucks this trend however. Here, rental growth is continuing to gain momentum with rents up 12.9%, compared to 11.4% a year ago.

That's largely because rents have been capped here, meaning landlords may only increase rents by 3% during a tenancy. That has led landlords and letting agents to push up prices for new lets in advance of them being rented out.

The cheapest places to rent in the UK - regions

For the cheapest rents in the country, the North East is where it’s at. Tenants spend an average of £671 per month on rent here.

Northern Ireland, Scotland and Yorkshire and the Humber all sit at the cheaper end of the scale too, with rents averaging less than £800 per month.

Rents in the South of England are much more expensive than anywhere else in the country.

London is by far the most expensive region to rent in the UK (£2,125 per month), followed by the South East (£1,291), East of England (£1,143) and South West (£1,058).

The cheapest UK cities to rent a home in 2023

Just because you want cheaper rent, it doesn’t mean you have to move out to the sticks.

The cost of rent varies a huge amount across UK cities, with Aberdeen, Belfast, and Newcastle offering the cheapest average rents.

The only major city where rents are below £700 per month is Aberdeen, where the architecture is gorgeous and the cost of living low.

In Belfast, rents are currently averaging £762 per month - plus it has affordable living costs compared to mainland Britain.

Renters in Liverpool are paying £798 per month to live in the UK’s friendliest city, where rents have risen 9.5% in the last year.

Cities in the Midlands tend to be more affordable, with Birmingham and Nottingham both posting average rents of below £950 per month.

Elsewhere in Scotland, you’ll find a dynamic city lifestyle and cheap rents in Glasgow, where rents average £930 per month. But Edinburgh is much pricier with an average rent of £1,259 per month.

In southern cities, you can expect to pay higher rent than anywhere else in the country. London and Cambridge have the highest monthly rents of any UK city, with Bristol also posting an expensive average rate of £1,374.

Key takeaways

• Rental inflation for new lets has now dropped below 10% for the first time in 20 months
• The UK rental market is now passed peak growth and we expect rents in 2024 to halve to a growth rate of 5%. That’s the lowest growth since 2021
• London will lead the slowdown with rents expected to increase by just 2% over 2024 as affordability pressures impact demand

by Blackstones