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New analysis by landlord insurer Direct Line for Business reveals the UK’s property hotspots for investment landlords.
Analysing average rental yields across UK local authorities, properties in Burnley in Lancashire offer the best returns for landlords with an annualised rental yield of 7.1 per cent. With average house price values in the town at £76,300 and annual rents of £5,388, landlords in the area are able to leverage from a better return on their property investment than other parts of the UK.
Glasgow City in Scotland comes in second (6.9 per cent.) and Belfast in Northern Ireland follows suit with annual yields of 6.4 per cent.
Table one: Areas with the highest rental yield in each UK region (2015-17)
|Local authority with the highest rental yield||Annualised rental yield, 2015-2017||Region||Regional rental yield, 2015-2017|
|Burnley||7.1 per cent||North West||4.6 per cent|
|City of Glasgow||6.9 per cent||Scotland||5.3 per cent|
|Belfast||6.4 per cent||Northern Ireland||5.6 per cent|
|Blaenau Gwent||5.9 per cent||Wales||4.6 per cent|
|Forest Heath||5.7 per cent||East of England||3.5 per cent|
|County Durham||5.6 per cent||North East||5.0 per cent|
|Kingston upon Hull||5.4 per cent||Yorkshire and the Humber||4.5 per cent|
|Stoke-on-Trent||5.4 per cent||West Midlands||4.5 per cent|
|City of Nottingham||5.2 per cent||East Midlands||3.9 per cent|
|Hounslow||4.9 per cent||London||4.4 per cent|
|Portsmouth||4.8 per cent||South East||3.8 per cent|
|City of Bristol||4.5 per cent||South West||3.7 per cent|
On a broader regional level, Northern Ireland offers landlords the best yield, with an annualised return of 5.6 per cent. This is followed by Scotland (5.3 per cent) and the North East (five per cent).
Meanwhile, rental markets in London, the South East and the East of England offer the poorest yields on properties largely due to the high cost of purchasing a property in these locations.
Rental yields in London, where the average house price exceeded £480,000 in 2017, stand at just 4.4 per cent (annualised), despite the average annual rents costing more than £20,000. Likewise, yields in the South East, where properties cost an average of £322,000, is relatively low at 3.7 per cent, while in the East of England (average property price of £289,000 in 2017) the annualised yield stands at 3.5 per cent, the lowest in the UK.
The range of yield on a regional basis can be explained by the broad variation in house prices across the UK and the smaller disparity in rent. While average house prices range from just £76,000 in Burnley to £1.25 million in Kensington and Chelsea, a multiple of 16 times, rents are more uniform. The highest average rent in the UK is in Kensington and Chelsea (£42,528 per year), nine times the cost of the lowest rent, which can be found in Blaenau Gwent, Wales (£4,803 per year).
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