Northern cities lead the way for buy to let investors

Buy to let investors can find the best returns in northern and Scottish cities, according to a new report from Zoopla.

The platform also says that rents will rise between 5% and 8% next year.

The report analysed the average gross rental yield, monthly rent and price of buy to let properties across the UK and ranked the top 10 cities and regions for BTL investors.

Zoopla says the average gross rental yield is 5.49%, up from 5.0% a year ago – due to house prices falling and rents rising across all regions.

The average BTL property costs £262,288 and the UK’s average rent is £1,201.

Best cities for buy to let investors

Zoopla reveals that Sunderland, Dundee and Burnley are the best cities for buy to let investors, with average gross yields of around 8%.

These cities have low house prices and high rents, making them ideal for landlords looking for a high return on their investment.

Other cities, such as Glasgow, Liverpool, Middlesbrough, Aberdeen, Blackburn, Hull and Grimsby, also made the top 10 list, with gross yields ranging from 7.07% to 7.90%.

These cities offer attractive opportunities for property investors due to their relatively low average house prices, excellent employment prospects and large student populations.

Top regions for buy to let investors

The report also ranked the top regions for buy to let investors and found that the North East, Scotland, the North West, Northern Ireland and Wales are the best places for rental yields, with average gross yields of more than 6%.

These regions have cheaper rents and buy to let properties than the rest of the country, giving them the highest average yield in the UK of 7.34%.

However, London, the South East and the East of England are the worst regions for buy to let investors, with average gross yields of below 5.2%.

London has the lowest gross yield in the UK of 4.92%, as higher mortgage rates, new regulations and low house price growth have limited landlord investment in the city.

Rents in London have also reached an affordability ceiling and tenant demand is starting to moderate.

Outlook for buy to let property investment

The report also looked at the outlook for buy to let property investment in the UK and predicted that rents will rise between 5% and 8% next year.

That rise will be down to tenant demand being a third higher than the five-year average and supply is limited by low new investment.

However, the report also warned that the rental market is about to turn, and that annual rental growth will halve to 5% during 2024, the lowest growth since 2021.

The report cites the ending of one-off pandemic after-effects, slower jobs and wage growth, and mortgage rates dropping since a year ago as influencing factors for the weakening rental demand.

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