Burnley in the North West of England is the latest hot spot for landlords with the highest annual rental yield in the UK at 7.1%, according to a new analysis.
This compares with a nationwide average yield of 3.6%, although the research from and landlord insurance specialist Direct Line also shows that yields are much higher in Northern Ireland and Scotland at 5.6% and 5.3% respectively.
The study reveals that with average house price values in Burnley at £76,300 and annual rents of £5,388, landlords in the area are able to leverage from a better return on their property investment than other part of the UK.
Glasgow is second at 6.9%, followed by Belfast at 6.4%, Blaenau Gwent at 5.9%, Forest Heath in the East of England at 5.7%, Country Durham at 5.6%, Kingston upon Hull and Stoke on Trent both at 5.4%, all above the national average.
Rental markets in London, the South East and the East of England offer the poorest yields on properties which the report says is largely due to the high cost of purchasing a property in these locations.
Rental yields in London, where the average house price exceeded £480,000 in 2017, stand at 4.4% despite the average annual rents costing more than £20,000. Likewise, yields in the South East, where properties cost an average of £322,000, is relatively low at 3.7%, while in the East of England where the average property price is £289,000 the annualised yield stands at 3.5%, the lowest in the UK.
The analysis explains that the range of yield on a regional basis can be explained by the broad variation in house prices across the UK and the smaller disparity in rent. While average house prices range from just £76,000 in Burnley to £1.25 million in Kensington and Chelsea, a multiple of 16 times, rents are more uniform.
The highest average rent in the UK is in Kensington and Chelsea at £42,528 per year, nine times the cost of the lowest rent, which can be found in Blaenau Gwent, Wales at £4,803 per year.
‘While home owners can look back at strong gains in the period between 2014 and 2017 where average property price was 17% it’s a different story for the rental market where average rents across the country rose by 4.7% during this period, which remains below the average salary increase of 5.3%,’ said Christina Dimitrov, business manager at Direct Line for Business.
‘As the number of renters across the UK increases, so too has the number of private landlords, with more than five million privately-let properties currently in the UK. With this increased competition, it is more important than ever that landlords are able to offer their tenants well maintained and fully insured properties that will provide best return on their investment in the future,’ she added.