Whether your focus is on the best monthly rental yields or the highest possible capital appreciation of your property, landlords need to consider all factors to make a good investment choice.
Across the UK as a whole, landlords reaped an average 3.5% in rental yields in April, according to research released by Howsy. This is despite the backdrop of coronavirus and its impact on the housing market since March.
However, as always, there are winners and losers across the country when it comes to rental yields. For some landlords and property investors, yields aren’t as important as owning a bricks and mortar investment. Particularly for accidental landlords, sometimes the property is mainly seen as an asset to be sold in retirement, and the rental yields are just to cover the costs.
While this investment strategy can be a valid one, many other landlords and investors rely on the monthly rental yields. Therefore, reaping a higher monthly return is a key consideration for an investment.
North-west: the top region overall
Howsy’s research revealed the top 10 and bottom 10 rental yield locations. While it didn’t hit the number one spot, the north-west was the top region overall in the UK for yields with three locations in the top 10.
Liverpool, which regularly wins the best place for rental yields in Totally Money’s annual report, came in fifth place for Howsy with 5.5%. These healthy, above-average yields are one of the top attractions for landlords looking to invest in a profitable property. What’s more, prices are well below average, meaning it’s a popular place to diversify a portfolio. It also attracts lots of first-time buy-to-let landlords. With huge levels of regeneration taking place in the city, Liverpool’s house prices are also forecast to rise in the future.
Preston came in joint fifth position with Liverpool with 5.5% rental yields. Having only gained city status in 2002, Preston has been the target of millions of pounds worth of investment in recent years. It was named one of the UK’s most gentrified cities due to its rapid improvement. It also came out as the top place to live and work in the north-west (PwC). Like Liverpool, house prices in Preston are below average and are on the rise. As such, it’s becoming an increasingly popular city to invest in the UK.
Manchester came in 10th position in the UK for rental yields, which average 5.2% according to April’s data. The city has long been a favourite among local, national and international investors. It is a key rental area attracting swathes of young professionals, including many from London, every year. Thanks in part to the Northern Powerhouse initiative, transport, employment, infrastructure and housing are all improving in Manchester. It was also recently named the best place in the UK to be a landlord.
The rest of the top 10
Bradford came out as the city with the highest yields overall. Here, landlords’ monthly returns were significantly higher than the UK average at 10%. This could be due to a higher than average number of HMOs in the area, which tend to be higher-yielding than traditional properties. Gwynedd in Wales came in second place with 6.2%, followed by popular tourist area North Down in Devon (6%) and Glasgow in Scotland (5.8%).
Calum Brannan, founder and chief executive of Howsy, commented that the lockdown has changed things in the market. The government has offered mortgage holidays for landlords on one hand, but has also banned tenant evictions.
“But despite this overall air of market uncertainty, tenants still need to find rental properties and so it continues to be business as usual for many landlords and those agents who have adapted to a more digital mode of operations.”
The bottom 10
Kensington & Chelsea, one of the most affluent areas in London, has the lowest rental yields. Landlords here reaped average monthly returns of 2.3% in April, according to Howsy. This is most likely due to the area’s extremely high house prices.
The south of England in general accounted for much of the bottom 10. Next on the list were Malvern Hills and Chiltern, both with 2.3%. North Warwickshire in the Midlands was fourth lowest with 2.4%.
According to Brannan, the data shows how landlords can find success if they target certain areas. He also believes the recent events could be a positive for some investors.
“Should the property market see prices fall, the cost of investing will be lower, boosting profit margins in a sector that has had it tough of late due to government squeezes on profitability.”