Property investors tend to see the most success from holding onto property as a long-term asset rather than turning a quick profit. So it’s vital to know where the best monthly rental yields can be found.
Choosing the best location as well as the optimum property type is one of the most crucial first steps towards a successful investment.
Location preferences will vary from investor to investor, whether they are looking for something close to home, a property to attract families, or something that will see the highest value increase over time. For many, calculating the likely monthly rental returns is a key factor, as this could cover the monthly mortgage repayments as well as leave money aside for repairs, meaning the property essentially pays for itself.
In a new report from Seven Capital using Zoopla data, the best locations for property investors looking for top yields have been revealed. With the average yield across the UK levelling at 3.63%, anything above this will be an added bonus for any investment.
Choosing a broader region
According to the findings, the overall region with the best rental yields is the north-west. The region has been recognised as the top-performing rental location in the past, and the latest results show it continues to hold its crown, with average rental yields of 4.41% in 2021.
Breaking the figures down, the average property price in the north-west is £214,767, so cheaper than the national average. Yet rents here are relatively strong at £790 per month, equating to £9,480 per year. Depending on the size of your mortgage – if you have one – while also factoring in other costs, there are clearly strong profits to be made.
Yorkshire and the Humber were also top of the list with average yields of 4.33% this year. In Scotland, yields can average 4.11%, and they’re 3.99% in Wales. Other top performers were the East Midlands (3.80%) and and the West Midlands (3.60%).
Property investors should look at postcodes
While knowing what general regions to consider is a good starting point, property investors can also find rental yield information on individual postcodes to hone in their search. In the past, Liverpool has reigned as having the highest number of top-yielding postcodes, and continues to be a city touted for its excellent investment potential.
This advice is reiterated by Toks Adebiyi, founder and CEO of Clooper. He believes it is vital for landlords to always consider areas outside of their current portfolio – or area where they live – to make sure they are maximising their investment.
He adds: “For example, in Manchester, Leeds and Birmingham, certain postcodes are hitting yields of between 6-12%, as property prices are considerably lower than the South East. Currently, the average UK rental yield is sitting at 3.63%, so anything over that amount can be considered a high rental yield area.”
Looking at locations where tenant demand is particularly high is likely to mean the best yields, he says.
Considering house price rises
While many landlords and property investors find success through holding onto their properties and bringing in monthly rental yields, a big chunk of the profit will also come when it is time to sell. Therefore, it is advised to also factor future house price forecasts into location choices.
According to the latest predictions from Savills, mainstream house prices will climb by +13.1% across the UK between now and 2026. But of course this will vary greatly between regions.
In the north-west, property prices could rise by 18.8% over the next five years. So, for an average property purchased now at £200,000, this would be gain of £37,600 by 2026. Yorkshire and the Humber mirrors this with the same 18.8% rise expected.
Wales is next on the list with 18.2%, followed by the north-east (17.6%), East Midlands (15.9%) and West Midlands (15.9%). All of these areas have been seeing positive housing market growth in recent years, with many locations within these regions being recognised as property investment hotspots.