High Yield Rental Areas UK – Best Hotspots for 2024

As we approach 2024, the UK rental market continues to evolve, shaped by various economic, social, and political factors.

This market has historically been a robust segment of the UK’s real estate sector, characterized by consistent demand and a steady influx of domestic and international renters. The landscape, however, is ever-changing, influenced by trends such as urban regeneration, shifts in employment patterns, and evolving lifestyle preferences.

The importance of identifying high-yield rental areas cannot be overstated for investors looking to maximize their returns.

High-yield areas are those where the rental income is high relative to the property’s purchase price. These areas are typically in regions with strong rental demand but reasonably priced properties. The allure of investing in such areas lies in the potential for steady cash flow, significant rental income, and, in some cases, substantial capital growth over time.

As we delve deeper into 2024, understanding these high-yield rental markets becomes crucial. Factors like population growth, infrastructure developments, and local economic health play significant roles in determining these high-yield areas. For savvy investors, staying ahead of the curve and identifying these hotspots is key to making informed, profitable investment decisions in the dynamic UK rental market.

The UK’s rental market landscape in 2024

The UK market is witnessing a sustained demand for rental properties, driven by factors such as increased migration to urban areas, a growing population, and affordability challenges in the housing market.

In many areas, rental prices are rising due to the imbalance between supply and demand. This is particularly evident in major cities and regions with strong economic growth.

Economic factors such as employment rates, wage growth, and interest rates continue to influence the rental market. Regions with thriving job markets are seeing an increased demand for rental properties.

The shift towards remote working is impacting rental demand, with a growing preference for properties outside city centers that offer more space and a better quality of life.

The market is expected to remain robust, with high demand in key areas. Investment in new housing developments and government policies around housing will play a crucial role in shaping the market.

Top regions for rental yields in the UK

Source: Zoopla Rental Index, December 2023

1.  North West England: Cities like Liverpool and Manchester have consistently offered high rental yields, thanks to their combination of affordable property prices and strong rental demand, particularly from students and young professionals.
2. Yorkshire and the Humber: This region, including cities such as Leeds and Sheffield, is known for its strong rental market, driven by a significant student population and growing employment opportunities in various sectors.
3. North East England: Areas like Newcastle and Sunderland offer attractive rental yields, primarily due to lower property prices compared to other parts of the UK and steady rental demand.
4. Scotland: Cities like Glasgow and Edinburgh, with their robust student populations and thriving tourism sectors, often see high rental yields. The overall lower property prices in Scotland also contribute to this.
5. West Midlands: Birmingham, being the UK’s second-largest city, along with other areas in the West Midlands, often show strong rental yields, supported by a growing economy and significant investments in infrastructure.
6. Wales: Certain areas in Wales, particularly cities like Cardiff and Swansea, are known for offering good rental yields, thanks to their combination of affordable property prices and a strong student presence.
7. East Midlands: Regions including Nottingham and Derby have been highlighted for their strong rental markets, buoyed by local universities and growing industries.
8. South West England: While generally known for higher property prices, certain areas in the South West, like Bristol, have a strong rental market that can offer attractive yields.
9. South East England: Although the property prices are typically higher, some areas in the South East, like certain parts of Kent, can offer good rental yields, especially in commuter towns with good transport links to London.
10. London: While central London often has lower rental yields due to high property prices, some outer boroughs and areas undergoing regeneration can offer better yields.

10 top cities for rental yields in the UK 

Source: Zoopla Rental Index, December 2023

The highest-yielding areas in different parts of the UK

Let’s delve into the regions across the UK, highlighting the top three local authorities in each region known for their impressive average gross rental yields.

North East:

•  Middlesbrough stands out with a gross rental yield of 8.52%.
•  Close behind is Sunderland, offering yields of 8.50%.
• Hartlepool also makes the list with a yield of 8.31%.

Scotland:

• Leading the charge is East Ayrshire, with an exceptional yield of 9.57%.
•  West Dunbartonshire follows with a yield of 9.15%.
•  Renfrewshire rounds up the top three at 9.13%.

North West:

• Burnley tops the list with a yield of 8.41%.
• Liverpool is also a strong contender, yielding 7.57%.
• Hyndburn offers attractive returns at 7.47%.

Wales:

• Blaenau Gwent stands out with a 7.38% yield.
• Neath Port Talbot follows closely with 7.23%.
• Merthyr Tydfil offers a competitive yield of 7.22%.

Yorkshire and the Humber:

•  Hull takes the lead with a 7.30% yield.
• North East Lincolnshire follows with 7.07%.
• Barnsley offers yields of 7.02%.

West Midlands:

• Stoke-on-Trent leads with a 7.09% yield.
• Newcastle-under-Lyme presents a yield of 6.52%.
• Coventry offers attractive returns at 6.46%.

East Midlands:

• Nottingham is a strong choice with 7.06% yield.
• Mansfield follows with a 6.40% yield.
• Boston is also competitive, offering 6.39%.

South West:

• Plymouth stands out with a 6.32% yield.
• Gloucester offers yields of 6.20%.
• Swindon is also noteworthy at 6.06%.

East of England:

• Great Yarmouth leads with a yield of 6.13%.
• Fenland follows with 6.05%.
• Peterborough offers a yield of 6.04%.

South East:

• Southampton tops the list with 6.42%.
• Gosport follows with a yield of 6.10%.
• Portsmouth also offers a strong yield of 6.09%.

London:

• Barking and Dagenham lead with a yield of 6.24%.
• Newham offers 5.78%.
• Bexley rounds off the list with 5.62%.

Maximizing returns in high-yield areas

To maximize returns in high-yield rental areas, investors should consider the following strategies and tips:

• Understand the Market: Conduct thorough research to understand the local rental market, including average rent prices, tenant demand, and popular property types.
• Property Selection: Choose properties that align with the demands of the local market. In student-heavy cities, smaller apartments or HMOs (Houses in Multiple Occupation) might be more lucrative.
• Effective Property Management: Efficient management is key to retaining tenants and minimizing vacancies. Consider hiring a property management company if self-managing is not feasible.
• Focus on Tenant Retention: Keeping tenants happy can lead to longer tenancies and fewer void periods. This includes timely maintenance, fair rent pricing, and good landlord-tenant communication.
• Add Value to the Property: Simple improvements or renovations can increase the property’s appeal and allow for higher rent charges.
• Adapt to Market Changes: Be prepared to adjust your strategy in response to market shifts, such as changes in local employment trends or university enrollment numbers.
• Leverage Technology: Utilize property management software and online platforms for efficient management and marketing of your rental property.

What is rental yield and why is it important

Rental yield is a key metric used in real estate investment to assess the profitability and potential return from a rental property. It is calculated as a percentage and represents the annual rental income a property generates, compared to the property’s purchase price or current market value.

There are two types of rental yield: gross and net.

Gross rental yield is the simplest to calculate and is found by dividing the annual rental income by the property’s purchase price (or current market value), then multiplying by 100.

Net rental yield takes this a step further by subtracting all operational costs associated with the property (such as maintenance, management fees, and taxes) before calculating the percentage.

Rental yield is a crucial indicator of the performance of a property investment. A higher yield means a property generates a higher return relative to its cost.

It helps investors to compare different properties and markets to make informed decisions. Properties with higher yields are generally considered more desirable for income-focused investors.

For investors relying on rental income to cover mortgage payments and other costs, understanding the rental yield is essential for managing cash flow and ensuring the investment is financially viable. Rental yield can reflect the state of the local rental market. High yields might indicate strong rental demand or lower property prices, while low yields could suggest a saturated market or overpriced properties.

It helps landlords in setting appropriate rent prices that align with market expectations and investment goals.

Understanding rental yield also plays a role in risk assessment. A stable or high yield can indicate a lower-risk investment, while a low yield might suggest higher risk or the need for further investigation.

How to work out yield in property

To work out the yield on a property, which is a measure of the return on your investment, you generally calculate either the gross yield or the net yield. Here’s how to do both:

1. Calculating Gross Yield:

•  Step 1: Determine the annual rental income the property generates. If the property is already rented out, add up the total rent received over a year. If not, research the area to estimate what the property could realistically rent for annually.
•  Step 2: Find out the current market value or the purchase price of the property.
•  Step 3: Calculate the yield by dividing the annual rental income by the property value (or purchase price) and then multiply by 100 to get a percentage.

Formula: (Annual Rental Income / Property Value) × 100 = Gross Yield%

Example:

If a property is worth £200,000 and it generates £10,000 in rent per year, the gross yield would be (10,000 / 200,000) × 100 = 5%.

2. Calculating Net Yield:

• Step 1: Start with the annual rental income as with the gross yield.
• Step 2: Calculate all the annual expenses associated with the property. This includes maintenance costs, property management fees, insurance, property taxes, and any other costs.
•  Step 3: Subtract the total annual expenses from the annual rental income to get your net income.
• Step 4: Divide this net income by the property value (or purchase price) and multiply by 100 to get the net yield percentage.

Formula: ((Annual Rental Income – Annual Expenses) / Property Value) × 100 = Net Yield%

Example:
If the same £200,000 property generates £10,000 in rent per year but has annual expenses of £2,000, the net income would be £8,000. The net yield would then be (8,000 / 200,000) × 100 = 4%.

It’s important to note that these calculations provide a general idea of yield. The actual profitability of a property can be influenced by many factors, including market changes, periods of vacancy, and unexpected maintenance issues. Therefore, it’s wise to use these calculations as part of a broader assessment of the property’s investment potential.

Conclusion

The future of high-yield rental investments is promising, but it requires adaptability and informed decision-making.

The ever-evolving property market landscape underscores the importance of staying abreast of changes, being responsive to new opportunities, and maintaining a flexible investment approach.

We can help you navigate property market nuances, including ideal investment locations, anticipated rental yields, and growth potential, while addressing legal and tax considerations and property management needs. This holistic approach ensures a smooth investment experience, whether you’re a novice or looking to expand your portfolio.

Contact us for in-depth advice and to discover the latest buy-to-let and investment opportunities. Our experts are ready to assist you in maximizing your investment returns in this dynamic city. Contact us today to begin your investment journey in Nottingham.