New analysis has revealed where some of the best rental yields are to be found.
Residential property management specialist Rushbrook compared average house prices with monthly rents in local authorities across England and Wales using the UK House Price Index and Office for National Statistics rental figures for August 2026.
As a benchmark, it calculated the average house price in England at £293,525, with a monthly rent of £1,459. This would produce an estimated gross rental yield of 6.0%. The equivalent figure in Wales was 4.7%.
Several major northern cities were among the strongest performing markets for rental income relative to property values, although high yields do not necessarily translate into the highest profits.
Newcastle upon Tyne had the highest average gross rental yield in England and Wales at 6.9%.
Portsmouth was second at 6.7%, followed by Tower Hamlets in east London at 6.6%.
Nottingham, Manchester, Southampton and Bristol tied for fourth place, each with an estimated yield of 6.4%. Next was Salford at 6.3%, with Blackpool and Lincoln completing the ten highest-yielding locations at 6.2%.
Lowest yields
Derbyshire Dales was at the bottom of the rankings with a gross yield of just 2.9%, which is less than half the English average.
Elmbridge and Waverley in Surrey, along with Powys in Wales, were next lowest at 3.1%. Malvern Hills had an average yield of 3.2% and was followed by Uttlesford and Forest of Dean at 3.3%.
East Devon, South Hams and Mole Valley completed the ten lowest-yielding locations, at an average of 3.4%.
Tax pressure on lower-yielding areas
Rushbrook’s findings come just after the Autumn Budget announcement of a further two-percentage-point increase in income tax on rental profits from April 2027. This comes on top of the two-percentage-point increase already announced last year.
With both increases taking effect at the same time, that is a total increase of four percentage points compared with current rates. It means that, from April 2027, the property income tax rates for basic-, higher- and additional-rate taxpayers will be 24%, 44% and 49% respectively.
Rushbrook managing director Roma Sharma said: “The Government’s decision to increase property income tax rates adds another layer of financial pressure for landlords, but the impact will vary considerably depending on where they own property and the returns they are already achieving.
“Those operating in lower-yielding areas may find themselves with very little room to absorb further costs once mortgage payments, maintenance and other expenses are accounted for. While stronger yields provide a better starting point, they certainly don’t make landlords immune to the additional tax burden.”
She added: “Minimising void periods, managing maintenance proactively and keeping unnecessary expenditure under control can make a meaningful difference to the long-term viability of a rental investment.”
Gross rental yields are calculated by dividing annual rental income by the property’s value and do not take into account mortgage interest, maintenance, insurance, management fees, void periods or tax. Actual returns can therefore be substantially lower.
