Through a challenging market nationwide, the buy-to-let sector in the north west holds the most promise for landlords with average yields hitting 5.5%.
Not only has the north west topped the list as the region offering the strongest rental yields for buy-to-let landlords in England, with a 5.5% average, but the area has also seen some of the best yield rises over the past year of 0.34%.
This is according to the latest research from Sourced Franchise, which looked at average house prices and rental values across the UK to calculate what yields the average landlord was achieving.
Looking across the UK as a whole, Scotland was ahead of the north west with average rental yields in the country of 5.9%, followed by Northern Ireland. This compares with a UK average of 5.2%, putting all three locations ahead of the curve and marking them out as promising property investment targets.
Yield growth presents opportunities
With the north west leading the way in terms of rental yields for landlords in England specifically, this was followed by Yorkshire and the Humber, where yields were also strong at 4.9%. London appeared next in the report, where average yields are now 4.7%.
Honing in on where rental yields have risen the most can be a good indication of where rental markets are performing particularly strongly, despite the recent slowdown in the country’s house prices. On average across the UK, rental yields have increased by 0.4% between June 2022 and June 2023.
Across the UK, Scotland also recorded the strongest growth year on year, with an above-average increase of 0.64. This was followed by London at 0.49%, Wales with 0.35%, and the West Midlands, north west and Yorkshire and the Humber which all recorded 0.34% rises.
The south east, which is also one of the country’s most expensive places to live, was the only region where rental yields decreased over the time period. The average in the region now is 4%, after a small 0.02% fall, according to the research.
Investors should “pounce” on best locations
Chris Kirkwood, director at Sourced Franchise, pointed out that the current economic climate could offer “great opportunities for investors who are willing to take calculated risks”.
He added: “Yes, the economy is struggling and rising mortgage rates are causing widespread concern on the housing market, but with house prices likely to fall further before they climb again, and rent values climbing at pace, buy-to-let landlords who can afford to take on current mortgage deals would be wise to pounce when the right properties come to market in the right locations.
“The same theory can be applied to all corners of the property industry, commercial and residential. The market is always cyclical and slumps and followed by growth and peaks. It’s moments like this that see great investors zig while everyone else zags, and therein lies the genius.”
North west showing resilience
In the latest house price index from the Office for National Statistics, the north west ranked in third position in terms of rising property values across all of England’s regions. The location saw a 2.7% rise between May 2022 and May 2023, above the average of 1.7%.
Still, house prices in the north west remain relatively affordable at an average £211,790, making it a key location for investors looking to maximise their budgets in a high-yielding location.
The average monthly cost of a rental property in the north west is currently £887.73, according to the latest data from Goodlord. It recorded a £10 monthly rise in the latest index, marking it out as a region with strong rental growth, while void periods there also remain relatively low for landlords.
For tenants, the north west remains one of the cheaper parts of the country to rent, though, and demand for property there is high. This is adding to the appeal of the region as a key investment spots for buy-to-let landlords.
