Revealed: Best buy-to-let property hotspots in the UK
Buy-to-let property landlords have not had it easy over the past few years, battling soaring mortgage rates, a stamp duty surcharge, and shrinking mortgage tax relief.
Mortgage rates were pushing 7% last summer, and there is still uncertainty over when the Bank of England will finally cut interest rates.
Slowing rental growth is also impacting landlords.
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So, what’s the best way to profit from a buy-to-let?
Choosing the right buy-to-let location could make the difference between raking in high profits and struggling to break even.
New research from lettings and sales agents group Lomond has revealed the top UK buy-to-let hotspots for property investors – and the results may surprise you.
The data shows that across the country, rental markets have witnessed a surge, resulting in the average rental yield creeping up from 4% last year to 4.5%.
So, which are the best buy-to-let areas in the UK?
Top buy-to-let property postcodes in the UK
The data reveals that the best buy-to-let property postcode is LS3 of Leeds, which boasts an impressive 12.8% average rental yield. This makes it the strongest location for the British rental market, with average asking prices at around £170,163.
The postcode is situated in the Harehills area, not too far from the city centre and with good connections to public transport services such as bus and railway stations.
It’s also in close proximity to several popular tourist hotspots such as Roundhay Park, East Leeds Golf Course, Temple Newsam and Harewood House. The locations covered in this postcode are parts of Gipton and Harehills, East End Park, Gipton Wood, Harehills, Moortown, Potternewton and Seacroft.
In second place comes Bradford’s BD1, meaning Yorkshire takes the top two spots. The BD1 postcode has an 11.8% average rental yield, and an average asking price of just £64,676 – potentially meaning a low investment and high returns for landlords.
Taking the third spot is Manchester’s M14, which has an average rental yield of 11.6%. It has the highest monthly rent and asking prices in the top 10 list, at £2,251 and £232,739 respectively.
| Postcode district | Area | Average asking price in March 2024 | Average asking rent per month in March 2024 | Average rental yield % in March 2024 |
|---|---|---|---|---|
| LS3 | Leeds | £170,163 | £1,816 | 12.8% |
| BD1 | Bradford | £64,676 | £638 | 11.8% |
| M14 | Manchester | £232,739 | £2,251 | 11.6% |
| NG1 | Nottingham | £157,468 | £1,419 | 10.8% |
| SR1 | Sunderland | £72,555 | £633 | 10.5% |
| NG7 | Nottingham | £215,523 | £1,750 | 9.7% |
| LS4 | Leeds | £223,269 | £1,811 | 9.7% |
| G67 | North Lanarkshire | £93,974 | £744 | 9.5% |
| AB24 | Aberdeen | £91,000 | £707 | 9.3% |
| CV1 | Coventry | £170,647 | £1,273 | 9.0% |
Source: Lomond
Highest buy-to-let rental yields by region
When you look at the bigger picture – and analyse regions rather than postcodes – the results are rather different. Scotland is currently home to the strongest rental returns on average at 5.4%, despite only having two entries in the top 10 postcodes tables.
In second place comes the north-east, which has a rental yield of 4.8%, and third is the north-west, at 4.6%. The lowest average rental yield is from the south-east, which is just 3.8%.
Interestingly, London ranks fifth, with an average rental yield of 4.3%, though average asking prices for rent are the highest at £1,970 a month. Typical asking prices for properties is a staggering £543,438. This is more than double the average of Scotland, which is £204,223.
| Region | Average rental yield % in March 2024 |
|---|---|
| Scotland | 5.4% |
| North East | 4.8% |
| North West | 4.6% |
| Yorkshire and the Humber | 4.4% |
| London | 4.3% |
| Wales | 4.3% |
| East of England | 4.2% |
| East Midlands | 4.0% |
| South West | 3.9% |
| West Midlands region | 3.9% |
| South East | 3.8% |
Source: Lomond
Postcodes with the biggest increase in average rental yield
If you’re looking for something more promising in the current market situation, the Leeds LS3 postcode could be your best bet. Not only is it the best buy-to-let property postcode but it has also witnessed the largest annual increase in rental yield of 5.6% from last year.
In March 2023, the average yield was 7.23% but it has now rocketed to 12.81%.
Glasgow’s G4 postcode boasts the second-largest increase in the average rental yield, with 2.7% growth.
Next is Nottingham’s NG1, which saw a 2.6% rise in average rental yields in the past year.
| Postcode | Area | Annual change in rental yield |
|---|---|---|
| LS3 | Leeds | 5.6% |
| G4 | Glasgow | 2.7% |
| NG1 | Nottingham | 2.6% |
| M14 | Manchester | 2.2% |
| NE2 | Newcastle | 2.1% |
| BS34 | South Gloucestershire | 2.0% |
| DN1 | Doncaster | 2.0% |
| SR5 | Sunderland | 1.9% |
| BS10 | Bristol | 1.9% |
| M6 | Salford | 1.9% |
Source: Lomond
Is buy-to-let still worth it?
While the government has clamped down on the housing market in the last couple of years with changes to the tax system, Martin Elliot, CEO of Lomond’s Yorkshire brands, advises landlords to be hopeful.
Elliot said: “Despite the government’s best efforts, buy-to-let investment remains a lucrative endeavour and we’ve seen the average yield on offer increase across all regions of Britain over the last year, with the exception of Scotland where it has remained static. Of course, some areas remain more profitable than others and by breaking the market down at postcode level, you can gain a real insight into where currently offers the strongest returns.
“While the top 10 postcodes boasting the strongest yields may be confined to the Northern and Midlands regions, that’s not to say there isn’t an abundance of opportunities elsewhere if you know where to look. So while the government may have attempted to lure more landlords away from the rental sector with a cut in capital gains tax, it remains a very good time to invest in rental market bricks and mortar.”
