Rental yields are a key indicator of success for many buy-to-let investors. They’re a great way of measuring the success of current property investments or finding ideal destinations for your next buy-to-let investment. But what is a good rental yield? This article discusses the best rental yields in the UK for 2023, examining the top cities and regions for UK rental yield performance.
 

What is a rental yield?

Before we examine the best rental yields in the UK, let’s consider what a rental yield is and what you should be looking for. By measuring the annual rental income you’re receiving from property investments, compared to the overall property value, you can estimate your returns and plan your finances properly.
 

Understanding your current and potential rental yields is key to maintaining the forward planning that can lead to success.
 

Fundamentally, rental yields are calculated based on how much annual rent your investment earns, measured against the price of the property when you purchase it. While rental yields can fluctuate based on how much rent you’re charging, these two pieces of data can help you establish a base line for your return on investment.
 

Property rental yields are split into two categories:
 

Gross Rental Yield - This is what your property yields without taking into account any of your expenses. This is a good potential indicator and is more useful during the research phase where you’re identifying locations that offer good returns.
 

Net Rental Yield - This is what your property yields when your expenses - such as service charges and maintenance costs - are taken into account. You should use this figure when planning your finances as it offers a more accurate example of your returns.
 

What is the average UK rental yield?

Based on the current average property price in the UK and the average asking rent at the time of writing, the average UK rental yield is 4.76%.
 

While this is a rough average that can vary between regions and property types, it’s a clear indicator of how much a property investor can stand to earn with a UK property investment.
 

The average rental yield has increased at a higher rate over the last year due to the rapidly rising rental market, which has seen prices grow by 9.2% between 2021 and 2022, leading to the average rent hitting £1,159 a month according to HomeLet.
 

In some markets, this growth has been more pronounced, driven by high demand for residential property and a relatively low supply. In cities such as Birmingham and Manchester, for example, property prices are much lower than those in the South but rents continue to rise, as demand for these exciting destinations grows.
 

This has a direct impact on yields as investors can still take advantage of an affordable entry point in terms of prices but charge higher rents.
 

For savvy investors, you can use our 2023 UK Market Forecast or our new piece, Best Places to Invest to learn more about the affordable areas that are showing potential for both capital growth and rental yield increases - including the factors that may lead to even further increases such as tenant demand, regeneration and new amenities.
 

Average rental yields in the UK

If you’re considering a property investment and you’re identifying your next investment destination, we can help. Below we’ve broken down the average rental yield each region is currently offering, based on data from the House Price Index and HomeLet.
 

While there’s uncertainty around the UK housing market in the current climate, there’s no denying that demand for rental properties is at an all-time high - a factor that can sustain rental yields in the UK heading into 2023.
 

This data shows that while London prices remain high, it still demands a respectable yield of 4.29%. That said, only a few regions achieve higher than the national average - namely the West Midlands, the North West and Scotland.
 

As previously mentioned, this is largely in part due to these regions achieving the ideal balance between property values and average asking rents. Thanks to large-scale regeneration in areas such as Edinburgh, Glasgow, Birmingham and Manchester, new businesses and new amenities are increasing demand, which in turn creates a more competitive rental market and raises the ceiling for rental yields.
 

Best rental yields per region in the UK

So, you know how the regions are performing but where are the best rental yields in each specific region?
 

If you have a particular area in mind where you’re looking to invest, some of the locations below represent the highest yields for property investment. All of these rental yields represent a gross yield:
 

London

In London, the best rental yields are in:

Barking and Dagenham - 5.12%

Newham - 4.87%

Bexley - 4.80%
 

South East

In the South East, the best rental yields are in:

Portsmouth - 5.60%

Gosport - 5.54%

Southampton - 5.54%
 

South West

In the South West, the best rental yields are in:

Plymouth - 5.64%

Gloucester - 5.45%

Swindon - 5.40%
 

West Midlands

In the West Midlands, the best rental yields are in:

Stoke-on-Trent - 6.63%

Jewellery Quarter, Birmingham - 6.18%

Coventry - 6.04%
 

East Midlands

In the East Midlands, the best rental yields are in:

Nottingham - 6.49%

Boston - 6.01%

Mansfield - 6.00%
 

East of England

In the East of England, the best rental yields are in:

Fenland - 5.60%

Peterborough - 5.49%

Great Yarmouth - 4.56%
 

North East

In the North East, the best rental yields are in:

Hartlepool - 7.64%

Middlesbrough - 7.61%

Sunderland - 7.61%
 

North West

In the North West, the best rental yields are in:

Burnley - 7.92%

Liverpool - 7.02%

Manchester - 5.17%
 

Yorkshire & the Humber

In Yorkshire & the Humber, the best rental yields are in:

Lincolnshire - 6.72%

Barnsley - 6.45%

Kingston-upon-Hull - 6.42%
 

Wales

In Wales, the best rental yields are in:

Blaenau Gwent - 7.02%

Merthyr Tudfal - 6.54%

Rhondda Cynon Taf - 6.44%
 

Scotland

In Scotland, the best rental yields are in:

East Ayrshire - 8.48%

West Dunbartonshire - 8.40%

North Lanarkshire - 8.07%

Data from Zoopla, HomeLet, Rightmove
 

Where are the fastest-growing rental yields in the UK?

For buyers that have an investment strategy focused around rental price hotspots, there are a number of areas that can help them maximise their returns. These destinations have demonstrated some of the highest rental price increases over the last year and represent a mix of regions across the country.
 

In terms of London, several records for the rental market have been broken during Q2 2022. The average asking rent for Greater London reached £2,257 pcm, the highest it has ever been.
 

While Outer London saw rents hit an average of £1,937 (an annual change of 10.8%), Inner London saw even further growth with rents hitting £2,693 (an annual change of 21.8%). This highlights the strength of the city and how yields are managing to stay around the national average, despite increasingly higher property prices.
 

Data from Rightmove Rental Price Tracker