The UK’s Highest Buy to Let Rental Yields
Where are the UK’s highest buy to let rental yields after the turmoil of 2020? Consultant Broker, Narinder Gill, examines new data revealing how rocketing house prices and continued uncertainty have affected which UK cities have the highest, and lowest, rent yields.
For many landlords, deciding where to invest can be strongly influenced by the area’s average rental yield. Typically, places where property prices are lower and demand for rental property is high produce the highest yields. Of course, it also depends on how much you invest in the property in the first place and how quickly you’ll be able to earn that investment back in rent.
Previously, we shared some data from Rentround, revealing which postcodes in the UK had the highest (and the lowest) rental yields immediately after the first 2020 lockdown. Since then, house prices continued to increase amidst stamp duty holiday fever, so it’s not surprising that there’s been some shift in the rental yield league tables. As there’s always a delay in releasing data, these figures are from the start of November 2020. It’ll be interesting to see how the further lockdown restrictions have impacted yields as we progress into 2021.
Headline Regional Rent Yield Changes
The top five cities with the highest rent yields are relatively unchanged; Sunderland and Liverpool kept the top spots despite average yield decreases of 0.37% and 0.40% to 5.30% and 5.22% respectively. Blackpool moved up from fifth to third with a 0.04% decrease. One surprise is Swansea rising 26 positions to fifth with a 0.55% increase to a yield of 4.53%.
However, the most significant rise goes to Bath, leaping up 32 positions to 60th! Conversely, Huddersfield dropped 32 places to 54th with a 0.6% average decrease in yields. Unfortunately, the cause of this drop is not entirely clear.
Unsurprisingly, some of the popular commuter areas around and including London feature in the bottom 20; Hemel Hempstead, Kingston-Upon-Thames, Watford, Reading and St Albans all suffering decreases. The largest fall in the bottom 20 goes to Guildford, which saw a reduction of 0.2% in rent yields and dropped 20 places. Properties in the South East and Greater London have seen the least increase in value. Recent data from Rightmove shows that average property values in the South East have increased just 2.3% since January 2020, and London property values appear to have decreased by 1.4% in the same time. For perspective, property prices in the rest of the UK increased by an average of 6%.
Newcastle, Sunderland and Durham all feature in the top 13, making the North East a strong contender for buy to let landlords looking to invest in high yield areas. Wales is also in a good position, with Swansea, Cardiff, Llandudno and Newport all in the top 15, with an average yield of 4.4% between them.
Despite some significant regional decreases, the good news is that, on average, rental yields across UK cities have only decreased by 0.07% - hardly substantial in the grand scheme of things.
Top 20 Cities for Buy to Let Rent Yields
| Position | City | Average Rental Yield (November 2020) | Change in Position (June vs November 2020) | Difference in Rental Yield (June vs November 2020) |
| 1 | Sunderland | 5.30% | 0 | -0.37% |
| 2 | Liverpool | 5.22% | 0 | -0.40% |
| 3 | Blackpool | 4.58% | 2 | -0.04% |
| 4 | Cleveland | 4.55% | -1 | -0.29% |
| 5 | Swansea | 4.53% | 26 | 0.55% |
| 6 | Cardiff | 4.49% | 6 | 0.15% |
| 7 | Newcastle | 4.47% | 3 | 0.05% |
| 8 | Manchester | 4.46% | -4 | -0.31% |
| 9 | Llandudno | 4.40% | -3 | -0.20% |
| 10 | Bradford | 4.37% | -3 | -0.22% |
| 11 | Leeds | 4.34% | 0 | -0.06% |
| 12 | Durham | 4.24% | 5 | 0.00% |
| 13 | Plymouth | 4.22% | 16 | 0.18% |
| 14 | Newport | 4.20% | 14 | 0.15% |
| 15 | Hull | 4.19% | -7 | -0.37% |
| 16 | Norwich | 4.16% | 14 | 0.15% |
| 17 | Sheffield | 4.07% | -2 | -0.18% |
| 18 | Nottingham | 4.04% | 20 | 0.25% |
| 19 | Bournemouth | 4.01% | 13 | 0.04% |
| 20 | Halifax | 4.00% | -4 | -0.25% |
Bottom 10 Cities for Buy to Let Rent Yields
| Position | City | Average Rental Yield (November 2020) | Change in Position (June vs November 2020) | Difference in Rental Yield (June vs November 2020) |
| 87 | Stevenage | 3.12% | -13 | -0.15% |
| 88 | London | 3.12% | -16 | -0.15% |
| 89 | Guilford | 3.12% | -20 | -0.20% |
| 90 | Reading | 3.11% | -4 | -0.02% |
| 91 | Gloucester | 3.11% | -2 | 0.00% |
| 92 | Chelmsford | 3.10% | -10 | -0.07% |
| 93 | Slough | 3.00% | -6 | -0.12% |
| 94 | St. Albans | 2.99% | -6 | -0.13% |
| 95 | Hereford | 2.90% | 1 | 0.27% |
| 96 | Harrogate | 2.90% | -3 | -0.06% |
As a property investor, those cities where rental yields have held fast throughout a challenging year are likely to be of interest. It demonstrates a substantial demand for rental property and that the broader property market is strong, making for a profitable long-term investment. This data also shows which cities are places to watch for the future, locations like Bath which have shot up the league table may well be a strong contender for 2021 investment plans.
Buying a buy to let property in a high yielding area is only part of the process when trying to ensure the most return on your property investment. Securing a competitive and suitable buy to let mortgage is key to getting a profitable financial return on your investment. At Mortgages for Business, we have access to thousands of buy to mortgages from across the market, many of which you can’t find yourself. Call me, Narinder Gill, on 01732 471 604 or email me narinderg@mortgagesforbusiness.co.uk for a no-commitment quote today!
Source: Rentround.
20th January 2021
