The best areas for buy-to-let in the UK
Find out where the best UK locations are for buy-to-let investments to ensure you can maximise your returns and streamline property management.
Summary
- Private rental prices in London grew by 3.6% between 2022 and 2023.
- The highest rental yields in the UK are in London, the East Midlands, and the East of England.
- Choosing the best place for buy-to-let depends on localised economic strengths, population, and the cost of living.
Despite the UK’s fluctuating buy-to-let property market, the demand for rentals continues to rise, introducing the opportunity for property investors to earn promising yields.
However, if you want to maximise your returns and ensure you buy property in one of the best places for buy-to-let, you must follow the number one rule of property investment - location, location, location.
Why invest in property in the UK?
Property is one of the most valuable assets to invest in in the UK.
London is ranked as the most stable and lucrative property market region globally.
With an average rental yield of 4.1% and an average property price of £523,000, this city alone is a good enough reason to invest in property in the UK.
But it’s not just London that presents lucrative buy-and-let opportunities for investors.
People will always need good property rental options. With the population growing faster than the current housing market, the imbalance between supply and demand offers a unique opportunity for investors to profit from rental income.
Where are the best places for buy-to-let by region?
The housing market in the UK is strong, particularly in London and the South East.
Private rental prices grew by 3.6% between 2022 and 2023, indicating a slow but steady upward trend over the next few years.
Like all countries, rental costs in the UK fluctuate depending on the local economy, population, and the cost of living.
If you are considering investing, take a look at the best places in the UK to invest in property based on high rental yields, according to Zoopla.
| Region | Average gross yield | Average monthly rent | Average price of a buy-to-let property |
|---|---|---|---|
| North East | 7.65% | £695 | £109,072 |
| Scotland | 7.48% | £793 | £127,284 |
| North West | 6.66% | £848 | £152,719 |
| Wales | 6.43% | £881 | £164,388 |
| Yorkshire and the Humber | 6.38% | £799 | £150,261 |
| Northern Ireland | 6.11% | £735 | £144,423 |
| West Midlands | 5.95% | £905 | £182,531 |
| East Midlands | 5.84% | £860 | £176,730 |
| South West | 5.37% | £1,077 | £240,472 |
| South East | 5.34% | £1,325 | £297,971 |
| East of England | 5.28% | £1,163 | £264,539 |
| London | 4.93% | £2,121 | £516,295 |
What is rental yield?
Rental yield is the annual income you can expect to earn from your property investment.
Understanding what a high rental yield is can help you make a more informed decision about which regions and property types to invest in.
How to calculate your rental yield
You can calculate the rental yield by dividing the annual rental income earned by the cost of purchasing a property before multiplying it by 100.
For example:
- John buys a house in South East London for £600,000.
- He rents it out at £450 per week.
- The gross rental yield is the annual rental income £450 x 52 = £23,400 / £600,000 x 100 = 3.9%
In this scenario, John’s rental yield for his purchased property is 3.9%.
What is a good rental yield?
As a rule of thumb, a high rental yield in the UK is between 5% and 9%.
However, rental yield depends on location and fees, taxes, and maintenance costs, which may vary.
The highest-yielding areas in each region of the UK
Although London is among the most expensive places to rent, its rental yield is not necessarily the highest in the country.
Let’s take a look at some of the highest-yielding areas:
1. North East
- County Durham: 7.81% gross rental yield
- Darlington: 7.52% gross rental yield
- Gateshead: 7.75% gross rental yield
2. Scotland
- Renfrewshire: 9.56% gross rental yield
- East Ayrshire: 9.50% gross rental yield
- West Dunbartonshire: 9.09% gross rental yield
3. North West
- Burnley: 8.40% gross rental yield
- Blackpool: 7.80% gross rental yield
- Preston: 7.55% gross rental yield
Considering that the average rental yield in the UK is currently 5.60%, investing in any of the above-listed areas would likely offer above-average rental yields.
Where are the best places to buy-to-let by city?
In the same way that the best places to buy-to-let vary by region, they also differ by city.
Despite a slight dip in the market, property prices in London are still the highest in the UK, with the average home in the capital priced at £519,505, according to Nationwide’s house price index.
If you’re looking for a high rental yield, then cities in the North of England offer far better returns than London as they have more affordable properties and high demand.
There’s also a larger number of younger renters outside of London.
Currently, 75% of Liverpool’s city centre population is aged 17 to 29, creating a massive market for rental properties.
These are the 10 best places to buy-to-let by city, according to Zoopla.
| City | Average gross yield | Average monthly rent | Average price of a buy-to-let property |
|---|---|---|---|
| Sunderland | 8.96% | £626 | £83,842 |
| Aberdeen | 8.03% | £689 | £102,920 |
| Burnley | 8% | £566 | £84,869 |
| Dundee | 7.96% | £774 | £116,690 |
| Glasgow | 7.95% | £951 | £143,617 |
| Middlesbrough | 7.92% | £613 | £92,862 |
| Blackburn | 7.52% | £661 | £105,460 |
| Hull | 7.45% | £612 | £98,617 |
| Newcastle | 7.45% | £833 | £134,245 |
| Liverpool | 7.44% | £801 | £129,172 |
Learn more: The happiest places to live in the UK
What else should you take into consideration when choosing a buy-to-let property?
Choosing the right property investment in the UK isn’t as simple as just picking a nice house and hoping for the best.
Property management, taxes, and landlord responsibilities can be a lot to handle, but these tips might help you handle these tasks with more ease.
- Understand property tax: HMRC will be keeping track of what you owe, so make sure to understand your tax liabilities to avoid penalties or extra fees.
- Consider hiring a property manager: Being a landlord can be a lot of work, especially when handling tenants, property maintenance, and management. Hiring a property manager means you won’t have to deal with tenants throughout the year.
- Research maintenance costs: Household repairs, renovations, and improvements will all be your responsibility to finance, and being prepared can mitigate their cost.
- Consider hiring a financial adviser: Buy-and-let property investments come with their fair share of paperwork and financial responsibilities, but hiring a financial adviser can make dealing with them significantly easier.
Want to learn more about investing in property?
The UK is one of the world’s best places to buy-and-let property.
Although the best areas for buy-and-let properties may be in huge demand, several other options can yield high rentals and returns.
Research the area where you want to buy and ensure you understand the tax implications and what managing tenants and a rental property entails.
In doing so, you can ensure your property investment in the UK remains profitable.
If you want to learn more about investing in buy-and-let property or any other assets, let Unbiased match you with a financial adviser.
Not only can a financial adviser offer expert advice and guidance, but they can also ensure you get the best buy-to-let mortgage rates, improving your return on investment.
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