Mojo Mortgages has been crunching the numbers and analysed data from the UK Land Registry, Zoopla, On The Market and property data portal, PropertyData.co.uk to find out where the current hotspots are, and also the areas that don’t generate profitable yields.
According to recent estimates, in the UK there are 2.6m buy-to-let landlords, and despite the pandemic, those who do have the cash to invest believe investment opportunities will emerge, with lenders cutting rates on buy-to-let products and raising affordability thresholds. There’s also market sentiment which is leaning towards limiting competition from other buyers and even pushing up demand for rental property.
Postcodes in the top 20 are generating some good returns. The highest being Liverpool, where landlords can enjoy yields of up to 10%. Bradford, Sunderland and Middlesbrough follow with yields of 10, 9 and 8% respectively. Liverpool and Sunderland are renowned university cities and the consistent flow of potential tenants puts landlords in a good position.
Even postcodes towards the lower end of the top 20 such as those in Aberdeen and Glasgow are returning yields of 7%.
Liverpool’s L7 postcode tops the buy-to-let yield table, generating yields of 10.30% and an average asking price of £95,000. L7 covers the area of Edge Hill and is in close proximity to Liverpool City Centre. Five more Liverpool postcodes feature in the top 20, with yield returns ranging from 7.40% to 10.30%.
In second place is Bradford with the BD1 postcode returning a rental yield of 10%, and the average asking price £57,000. BD1 covers the main town centre of Bradford, offering commuters easy access to bigger cities such as Leeds.
Over to the North East, and Sunderland is generating 9.40% in rental yields. Having a solid student population is helping to prop this percentage up. The average asking price of a property in Sunderland is £61,000
Mojo reveals that the North West is one of the top regions for strong buy-to-let yields. As well as a number of profitable areas in Liverpool, the area of M14 in Manchester which covers Fallowfield has a yield of 7.60%. Both these cities have a solid student population, plus property prices are relatively low.
Properties in the City of London and its surrounding boroughs generate the lowest yields in the UK, whilst average prices to buy are above the £1,000,000 mark. The South East also features in the list, more than likely due to areas such as Wokingham, Chiltern and Horsham being commuter hotspots, rather than areas to rent in.
Stratford-upon-Avon is the only location from the West Midlands to feature in the bottom 10 with an average yield of 2% and asking average prices at just over half a million.
The capital has a huge demand for rental properties and being in the big smoke allows for a more diverse range of abodes to choose from. IG11 in the London Borough of Barking offers the best rental yield and average asking prices of £289,374. Dagenham features three times in top 10, with areas such as Becontree and Becontree Heath also generating yields of more than 5%.
The London Borough of Ealing only featured once in the top 10 with Northolt generating an average yield of 5%.
High property prices in London means that a buy-to-let property in the area must work hard to return a profit, however, in some areas of the city, that can prove to be difficult.
The postcode of W1 in Central London generates the worst yield at 1.4%, with the average asking price of property around £2.3m, whilst average asking rent is at £2,807 per month. The average salary in London equates to £37k annually, and £2,300 monthly, making it unaffordable for many sole renters to go it alone.
The best of the ‘worst’ is in Hampstead Heath, N6 where the average asking price is lower than in other areas of the worst 10, at £865,000, and average asking rent is £1,614, making the buy-to-let yield 2.2%.