Landlords are having to carefully weigh higher rental yields against the potential for capital growth as new research reveals significant differences in buy-to-let performance between the regions.
The latest Pegasus Insight Landlord Trends Report, produced in conjunction with specialist lender Foundation, shows that the areas offering the highest rental returns are not necessarily those with the most valuable property portfolios or the highest profitability.
Nationally, landlords had an average portfolio value of £1.8 million during the second quarter of 2026, with gross rental income averaging £12,007 per property and yields of 6.4%.
86% of landlords said they were making a profit from their lettings activity, with just 5% reporting a loss.
High values but low profits
Central London landlords have by far the most valuable portfolios, averaging £3.7 million, as well as the highest rental income at £17,989 per property.
Average rental yields, though, are 5.3%, which is more than a percentage point below the UK average.
Higher property values, though, can mean having to accept a lower rental yield in return for greater exposure to potential long-term capital growth. Lower purchase prices elsewhere can produce stronger income returns.
East midlands has biggest yields
The East of England and East Midlands recorded the highest average yields at 7.3%, followed by Yorkshire and The Humber at 6.8% and the North East at 6.6%.
The South West and West Midlands both had average yields of 6.5%, slightly above the national average.
The East Midlands combined the joint-highest average yield of 7.3% with the highest proportion of landlords making a profit, at 92%. The West Midlands followed at 90%, with the East of England and South West both recording 89%.
Grant Hendry, director of sales at Foundation, told Mortgage Solutions that the research shows there is no such thing as a typical buy-to-let market. Although the national figures reveal a profitable and resilient sector, he says the opportunities and challenges vary considerably depending on where landlords invest.
Looking beyond headline yields
And those regional differences extend beyond yields and profitability to voids and arrears.
In the North East, landlords’ average yield was 6.6%, but 55% reported experiencing a void period and 42% had experienced rental arrears.
Arrears were highest in Yorkshire and The Humber, affecting 43% of landlords, followed by the North East at 42%, the North West at 39% and the East Midlands at 37%. The UK average was 26%.
Purchase price and achievable rent are only part of the calculation. Tenant demand, financing and running costs, voids and arrears all affect the income a property produces.
Hendry says landlords need to consider these regional differences in relation to their longer-term objectives, including refinancing requirements, acquisition plans and wider portfolio strategy.
Landlords adjusting strategy
The buying and selling figures suggest some landlords are already adjusting their portfolios as they look for the right balance between income and longer-term growth.
The North West recorded the highest proportion of landlords selling properties during the previous year, at 30%, followed by Yorkshire and The Humber at 29% and the East Midlands at 25%.
The figures do not show whether landlords were reducing their overall holdings or selling individual properties as part of a wider portfolio strategy.
The highest proportion of buying activity was in the North East, where 18% of landlords had purchased a property.
The data, however reveals no outright winner, so investors must decide for themselves which regions and properties best suit their investment goals.
