buy-to-let rental contract rental yields

Top rental yields in the north driven by Liverpool and Manchester

Regions in the north continue to see the best rental yields in the UK, with the north west and Yorkshire and Humberside moving into the top three.

A new buy-to-let rental barometer released by Fleet Mortgages has revealed how rental yields are currently performing across the country. The data shows that, despite a year-on-year dip of 0.6% down to 5.7% in Q1, there has been an overall improvement since Q4 2021 in the UK.

The north east continues to outperform the rest of the country for the seventh consecutive quarter, with average yields there hitting 8.7% for buy-to-let landlords.

However, Fleet’s findings also show that the north of England as a whole leads the way for rental returns, with Yorkshire and the Humber attaining the second highest rental yields of 7.5% in Q1 2022, followed by the north west with 6.7%.

Top hotspots for rental yields

For buy-to-let landlords seeking the healthiest monthly returns, Fleet highlights the cities of Liverpool, Manchester and Sheffield. These areas have seen surges in tenant demand in recent years, which have buoyed the rental market.

A recent report from Goodlord revealed similar trends, with its latest data showing that the north west had seen the biggest rent increase between February and March thanks to heightened demand. The region experienced a 6.36% average rent rise, bringing the average rent to £819.84.

In terms of rental yields, Liverpool is frequently listed in a number of indices as one of the top spots, thanks to its low house prices and very strong tenant demand.

The future of property investment

Despite the year-on-year dip in average rental yields across some of the country’s regions, the overall picture is a positive one for buy-to-let landlords, according to Fleet.

Previous predictions by the mortgage provider indicated continued strong demand for rental homes in the UK over the course of the year, alongside a small rise in mortgage rates, and these forecasts are holding strong so far.

Steve Cox, chief commercial officer at Fleet Mortgages, says: “This demand-side strength, coupled with relatively tight supply, means rental yields continue to be strong, and that overall – across England and Wales – we have seen an increase in levels compared to the last quarter of 2021.”

Looking ahead, Cox notes: “It’s likely that landlords are going to need to cut their cloth accordingly when it comes to setting rents, especially given the large increases in the cost of living that tenants are clearly not immune from and will need to be factored into rent levels.”

He believes UK property investment “retains its allure as a strong asset class”, supported by the wealth of finance opportunities available at “highly competitive levels”.

Cox adds: “As we move through the year it is likely that rates will inch up though. However, there are a wide range of opportunities for all types of landlords, wanting to purchase or refinance all types of rental properties, and that this should help bring much-needed supply into the private rented sector.”

Finding the best buy-to-let location

There are myriad factors that will affect where an investor chooses to purchase a rental property. Rental yields, for many, will be high on the agenda, as will potential capital appreciation prospects.

Saif Derzi, head of SDGB Properties, who has built up a property portfolio in the UK with the help of Together Mortgages, has come up with his top five pointers for successful property investment.

Top of his list is choosing the right location based on your property investment goals, which could involve speaking to local agents. He also advises that property investors apply caution to any opportunities, including when buying to renovate and add value to a property.

Choosing between buy-to-sell and buy-to-let is another key factor, with both options having a number of pros and cons. Finally, Derzi advises selecting a lender carefully.

BuyAssociation specialises in finding unique and exclusive property investment opportunities across the UK, with multiple properties available in hotspots including Manchester and Liverpool. Get in touch today to find out more.

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