Property investors looking to make the highest monthly rental yields from their buy-to-lets should continue to focus on the North of England.
The UK rental market has been accelerating in terms of tenant demand and rental prices for several years, meaning most investors are seeing huge amounts of interest in their properties for rent. Of course, choosing the right property in the right location is still paramount when looking to achieve the best returns.
House prices can be another important deciding factor when looking for a successful buy-to-let opportunity – this might mean opting for a cheaper area if you’re investing in more than one property, or looking at locations with the strongest track record for property prices in recent times.
Places with ongoing and planned future regeneration and improvement plans also tend to be favourite investment locations, as not only will prices continue to climb in these areas, but tenant demand is also likely to increase – which again brings with it the opportunity for better rental yields.
New research released by Lomond has singled out the top 10 performing postcodes in the UK for rental yields. Eight out of the 10 locations are in the North of England, with the other two being situated in Scotland.
Rental yields above 10%
Five of the top 10 locations are enjoying average rental yields of more than 10%, and there will be some properties in these areas – potentially including higher-yielding houses in multiple occupation (HMOs) where yields are even higher.
The top 10 postcodes were:
| LS3 | Leeds | £170,163 | £1,816 | 12.8% |
| BD1 | Bradford | £64,676 | £638 | 11.8% |
| M14 | Manchester | £232,739 | £2,251 | 11.6% |
| NG1 | Nottingham | £157,468 | £1,419 | 10.8% |
| SR1 | Sunderland | £72,555 | £633 | 10.5% |
| NG7 | Nottingham | £215,523 | £1,750 | 9.7% |
| LS4 | Leeds | £223,269 | £1,811 | 9.7% |
| G67 | North Lanarkshire | £93,974 | £744 | 9.5% |
| AB24 | Aberdeen | £91,000 | £707 | 9.3% |
| CV1 | Coventry | £170,647 | £1,273 | 9.0% |
The table reveals that Leeds, Bradford and Manchester are in the top three areas for rental yields. While Manchester’s average property price is considerably higher than Leeds and Bradford, the fact that it also commands much greater rents puts it in a strong position on the list.
By region, Lomond’s research found that Scotland was actually the highest-yielding place in the country overall, followed by the North East and then the North West. Both of these regions are particularly popular among property investors in the current climate; while bottom of the list for rental yields was the South East.
Should you invest?
To make money out of a property investment, buyers must factor in the likelihood of future price rises, which is why most property investments are viewed as a long-term venture due to the nature of the market, with the best returns to be realised over a number of years.
Rental yields must also be considered, with factors like competitive pricing and areas of high tenant demand being important considerations, as well as property type. Some investors focus on HMOs as they tend to generate much higher yields, but there are also more regulatory issues to consider, as well as more complex property management.
The whole market has seen a shift over the past couple of years due to increased interest rates, pushing up borrowing costs for homeowners and landlords alike. Those in a position to buy with cash, or rely on less leverage, may have fared better in these conditions, but strong rent rises will also have offset some of the rising costs.
On the UK’s property investment landscape at the moment, Martin Elliot, CEO of Lomond’s Yorkshire brands, said: “Despite the government’s best efforts, buy-to-let investment remains a lucrative endeavour and we’ve seen the average yield on offer increase across all regions of Britain over the last year, with the exception of Scotland where it has remained static.
“Of course, some areas remain more profitable than others and by breaking the market down at postcode level, you can gain a real insight into where currently offers the strongest returns.
“While the top 10 postcodes boasting the strongest yields may be confined to the Northern and Midlands regions, that’s not to say there isn’t an abundance of opportunities elsewhere if you know where to look.
“So while the government may have attempted to lure more landlords away from the rental sector with a cut in capital gains tax, it remains a very good time to invest in rental market bricks and mortar.”
