Get the real low-down on UK Rental Yields, how to calculate them, how to improve performance and what to look for in your next property investment.
Investing in property can be a profitable venture, especially when you focus on areas with the best UK rental yields. Rental yield, a key metric for property investors, represents the potential return on investment through rent. Understanding how to calculate rental yields and knowing which areas offer the best returns can significantly enhance your investment strategy.
So, what are the best UK rental yields, and how can this inform your investment strategy?
Rental yield is the potential return on a property investment through rental income, expressed as a percentage. It’s a critical figure for landlords and property investors to assess the profitability of their investments. The higher the rental yield, the better the return on investment.
Rental yield is a measure of the return on investment for a property, expressed as a percentage. It helps investors understand how much income a property generates relative to its cost or value. Generally, a rental yield of over 5% is considered good.
There are two main types of rental yield: gross rental yield and net rental yield.
Gross rental yield is calculated using the total annual rental income generated by the property before any expenses are deducted. You can calculate this by following these steps…
Net rental yield takes into account all expenses related to the property, such as maintenance costs, insurance, property management fees, and taxes. Here’s how you can calculate it…
Rental yields are vital in helping investors determine how profitable a property is, or could be. It is generally one of the first considerations an investor will look at when finding an investment unit – how much yield, or ‘profit’, is the property liable to make? This is why higher yields are generally more attractive to investors.
Different regions, cities and property sizes will generate different yields as a result of varying economic factors, local demand, and property market conditions. All of these moving parts ultimately influence how much a property is likely to cost for an investor, how much they can rent a property out for, and how expensive it would be to run the property. This isn’t to mention the impact of property types on rental yield, with residential, commercial and industrial units in the same postcode all likely to produce varying yields. Please note – in this article we will be focusing on residential property yields, meaning that we will only be considering residential investment properties that tenants can reside in.
Ultimately, a good rental yield isn’t just about having high returns – it’s about attracting great tenants. After all, inconsistencies in your tenancies can significantly damage your overall rental yields by making you more susceptible to void periods, which are periods of time where you do not have a sitting tenant and are therefore generating no income.
It is also important to purchase a rental property that will not be extortionate to run, as wear and tear as well as ongoing maintenance costs can be a significant financial drain that will ultimately impact your yields. This is why the team here at Centrick Invest are so passionate about high-quality new build homes and off plan properties in great locations with high demand – properties that are ready to rent upon completion and are far less likely to need regular maintenance upgrades.
Looking to invest in UK property with exceptional rental yields? Explore our range of developments across the UK.
Looking for the best UK rental yields? Our team have whittled the long list of the UK’s towns and cities down to just three key investment hotspots that don’t just generate exceptional yields, but are expected to see inward investment, regeneration, and long-term surges in tenant demand. We’ve searched for areas that present abundant opportunities for renters in the form of jobs, entertainment, education and more – all of which are likely to boost your capital appreciation in the long-run and keep tenants interested. Here are our top picks…
First on our list is the powerhouse of the north – Manchester. Manchester is a bustling city with a vibrant rental market, and according to PropertyData, rental yields in Manchester City Centre sit at quite an impressive rate. Manchester studio apartments generate yields of 6.3%, one-beds have average yields of 6.5%, two-beds generate yields of 5.5%, and three-bedroom properties generate an average yield of 5.2%.
The average monthly rent in Manchester is currently £747 for studios, £1063 for one-beds, £1349 for two-beds, and £1690 for three-beds, the city sees an average of 874 rentals per month, which signals that the city is experiencing high tenant demand – and it’s no wonder. With an abundance of exciting regeneration projects at Spinningfields, NOMA and MediaCity, and exciting job opportunities at big businesses such as KPMG, Amazon and EY to name a few, Manchester is pulling in tenants from across the UK. It’s no wonder Manchester is proving a popular destination for those participating in the mass London exodus.
But where in the city should you focus on investing? Here are three areas in Manchester that are experiencing huge regeneration, and that we expect will become investment hotspots in the near future:
This area is undergoing significant development, with plans for 15,000 new homes and seven neighbourhoods. With £1 billion set to be invested over the next two decades, Victoria North is an exciting prospect for investors. What's more, this area of the ‘northern gateway’ is already generating yields of around 7% in the M40 postcode.
Located just 3 miles from the city centre, near the new Co-Op Live stadium and Etihad Stadium, Clayton is ideal for short-term rentals and Airbnb opportunities. It’s no wonder the region is currently seeing average yields of 7.3% according to PropertyData.
With the city’s newest park and a new £180 million sustainable office development, Mayfield is an upcoming hub for new businesses, employees, and tenants. The M1 postcode in which Mayfield sits is already generating yields of 5.9%, but we expect to see a huge increase in interest across this region in the years to come.
Birmingham, the UK’s second-largest city, offers similarly competitive rental yields. With average monthly rents in Birmingham sitting at £800 for studios, £940 for one-beds, £1245 for two-beds, £1573 for three-beds, and £2200 for four-beds, Birmingham sees an average of 1069 rentals per month and a 66% stock turnover rate, indicating very high demand.
It’s no wonder – as the youngest major city in Europe which is home to 80,000 students, paired with an increasing number of businesses leaving their London HQ’s behind including Goldman Sachs, Deutsche Bank and PwC, demand for property in the second city is exceptionally high.
As for average rental yields in Birmingham, studios generate the highest yield at 7%, one-bedrooms create yields of 6.2%, and two-bedroom units sit at 5.4%. This dips with three-bedroom properties which generate an average yield of 4.5%, before increasing again with four-bed homes which create yields averaging at 6%.
As a Birmingham-based property investment business, we’ve pinpointed three key areas you should focus on when it comes to finding your next investment…
With properties in Longbridge seeing 21% capital growth from 2019 to 2023, we anticipate Longbridge will become an investor hotspot in years to come. The B31 postcode, which encompasses Longbridge, currently generates average yields of 4.8%, although with such extensive regeneration on the horizon we anticipate that this will increase over the coming years.
Home to some of the swankiest apartments in Birmingham, the Jewellery Quarter has long been a popular haven for tenants and investors alike. From the glorious Gothic apartments to the Grade II listed Pressworks, the JQ has plenty to offer. Better yet, Jewellery Quarter investors can expect to generate yields of 6.2% according to PropertyData.
Home to the new HS2 hub at Curzon Street, which will connect Birmingham directly to London, Digbeth is expected to see a huge influx of interest in the coming years. With 25,000 daily commuters set to use the network, this will most certainly increase demand for rental properties. Similar to the Jewellery Quarter, investors can anticipate yields of approximately 6.2% in Digbeth.
Nottingham boasts some of the highest rental yields in the UK, with our research with PropertyData suggesting that those looking to invest in the Nottingham city core could achieve yields of over 14% – a truly exceptional feat. In fact, our research shows that yields in the city centre do not dip below 6%, making this East Midlands powerhouse a truly lucrative location for investors. Studios generate yields of 14.7%, one-beds of 8.1%, two-beds of 7.5% and three-beds of 6.3%.
With average monthly rents in Nottingham sitting at £770 for studios, £806 for one-beds, £1131 for two-beds, £1278 for three-beds, and £2184 for four-beds, Nottingham sees an average of 740 rentals per month. Better yet for investors, Nottingham property is priced extremely competitively – the latest Land Registry data puts the average Nottingham property at a value of £193,000, which sits far below the English average of £298,000, representing a huge saving of £105,000. With such exceptional yields and low prices, it’s no wonder Nottingham investment property is being snapped up fast.
But which parts of the city offer the best potential for future growth and boosted yields? Here are our picks…
This city-centre area is particularly close to the redevelopment of Broadmarsh, which is creating jobs in construction and long-term careers upon completion. These employees will need local homes, and we anticipate this surge in demand will certainly benefit landlords. Current rental yields in the NG1 area sit at 9.5% according to PropertyData, making this city-centre hotspot a fantastic option for buy to let investors.
Home to the most ambitious project in the city, this 36-acre redevelopment project includes a hotel complex, apartments and office space. With everything on your doorstep, we expect tenants will flock to the Island Quarter andnearby Colwick and West Bridgford. Currently, the NG2 postcode is generating yields at 4% - however, we anticipate yields will increase as the redevelopment of the Quarter approaches its conclusion.
When it comes to property investment, focusing on areas with high rental yields can ensure you generate the exceptional returns you’re hoping for. Manchester, Birmingham, and Nottingham each stand out for their own unique merits with promising rental yields and ongoing developments that are set to create the increased demand and capital appreciation investors are looking for. So, whether you’re a seasoned investor searching for the next addition to your portfolio, or just starting your property investment journey, these cities offer lucrative opportunities for rental property investment.
Looking for your next property investment with exceptional yields? Explore our range of developments across the Manchester, Birmingham, Nottingham and beyond...
Here at Centrick Invest, we are passionate about sourcing exceptional properties across cities and suburbs across the UK to present to our investors. Our team are proud to sell units at a range of developments across England - from swanky studio apartments in the Jewellery Quarter, to luxury apartments in the heart of Manchester, to glorious new-build family homes nestled in suburbia.
New Homes & Investments Director
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