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