Best UK rental yield hotspots for 2024

What is a good rental yield?

Rental yield is the annual rental income of a property divided by its value. The higher the rental yield, the better the return on investment.

A rental yield of 5% - 8% is often considered good. It's important to calculate the yield accurately by taking into account all costs associated with purchasing and maintaining the property, including mortgage costs, service charges, and maintenance fees.

What are the rental yield trends?

According to data from Zoopla, rents rose by 9.7% in 2023. This growth is forecasted to continue at 5% in 2024.

The rental market is still being squeezed by high demand from tenants and low supply. Due to the cost of living crisis and higher interest rates, more people are delaying buying houses and are continuing to rent. Rents are continuing to rise, outstripping wage growth, meaning that rent affordability is a concern for many.

Landlords are also being squeezed by rising costs, including mortgage interest rates. Though it’s undeniably tough out there for landlords, there are areas delivering decent yields.

UK highest buy-to-let rental yields for 2024

Analysis by Zoopla shows properties in Scotland and the North East have the highest rental yield in the UK.

Source: Zoopla

Buy-to-let investment hotspots

Birmingham

• The UK’s second largest city

• Fast-growing tech and financial sector

• HS2 railway investment

• Ongoing regeneration to city centre, suburbs and infrastructure

• Voted one of the best cities to live

• Educational hub with 5 universities

According to Rightmove, properties in Birmingham had an overall average price of £256,167 over the last year.

The majority of sales in Birmingham during the last year were semi-detached properties, selling for an average price of £264,071. Terraced properties sold for an average of £212,446, with flats fetching £151,649.

Overall, sold prices in Birmingham over the last year were similar to the previous year and 8% up on the 2020 peak of £237,739.

Nottingham

• Large student population from two universities: University of Nottingham and Nottingham Trent

• Home to the largest teaching hospital in the UK, the Queen’s Medical Centre

• HQ to major companies, including Boots, EON and Experian

• Extensive tram network with lines north and south of the city

According to Rightmove, properties in Nottingham had an overall average price of £240,864 over the last year.

The majority of sales around Nottingham during the last year were semi-detached properties, selling for an average price of £223,816. Detached properties sold for an average of £359,717, with terraced properties fetching £172,222.

Overall, sold prices around Nottingham over the last year were similar to the previous year and 9% up on the 2020 peak of £221,915.

Manchester

• The largest economic area outside of London

• Fast growing centre for tech and media sectors

• One of the largest university cities in the UK with 5 universities

• Property prices up to 40% cheaper than in London

According to Rightmove, properties in Manchester had an overall average price of £284,922 over the last year.

The majority of sales in Manchester during the last year were semi-detached properties, selling for an average price of £310,672. Terraced properties sold for an average of £231,897, with flats fetching £202,562.

Overall, sold prices in Manchester over the last year were 1% up on the previous year and 11% up on the 2020 peak of £255,818.

One to watch: Derby

PropertyHub named our home city, Derby, as their investment hotspot for 2024.

• Home to global businesses Rolls Royce, Toyota & Bombardier

• High-value manufacturing industries with skilled high-paying jobs

• Major regeneration projects underway, including £3.5 billion 2030 Derby Masterplan

• Excellent transport links to M1, rail and East Midlands Airport

In March 2023, the Land Registry showed that average residential property values in Derby had risen from £183,890 to £208,638 over the 12 months to December 2022; an annual gain of 13.45%.

3 tips for property investors for 2024

Wherever your next investment property may be, here are our three essential things to consider.

Decide on your investment strategy and goals

Will you focus solely on buy-to-lets, property flipping or development? Are you planning on adding a HMO or student let in Birmingham to your portfolio?

Does it fit with your long-term goals? Consider if they are a good fit for your preferred investment style.

Do your research and forecast expected returns

Thinking of investing in one of the top cities mentioned? Ensure you undertake further research into specific areas that align with your strategy. Use our free buy-to-let calculator to forecast projected rental yields and capital growth. Why not call a few local lettings agents to check if the areas you are considering align with tenant demand and your projected yields.

Get specialist tax advice

Switching strategy or changed your short or long-term goals? It may be worth getting tax advice to see if there are any tax savings available. For instance, if you’re planning on buying multiple properties in the same transaction (i.e. a block of 4 flats) you could be eligible for Multiple Dwellings Relief.

Book a tax call for one-to-one advice from a property tax expert >

Are you buying via a limited company in 2024?

Due to rising interest rates and tax savings, more and more investors are buying property through a limited company, rather than in their personal name. A record 50,000 BTL limited companies were started in 2023 and 4 out of 5 investment properties are now bought via a limited company structure.

Your buy-to-let company structure could make a big difference in the amount of tax you’ll pay and the speed at which you can grow your portfolio. Over 56% of investors set up their company before making an offer on a property, and many are tempted to set up quickly themselves. However, our analysis of Companies House data with DIY setups has found that 40% of companies have hidden tax and legal problems, which could have easily been avoided. Read our expert guide to understand the limited company mistakes to avoid.

Start up with Provestor

Whenever you’re ready, here are 4 ways we can help you start and manage your buy-to-let limited company:

• Tax Advice. Talk through your options and increase your confidence by booking a tax consultation with our Chartered Property Tax Advisors.

• Company Start Up. For a smooth start and to avoid costly mistakes, our expert team can incorporate your limited company, for less than you think.

• Accounting Tax App. Keep on top of your finances in minutes, and prepare and directly submit your accounts and tax returns, with our easy-to-use property accounting app, designed specifically for landlords.

• Advisory Service. As your portfolio expands, the complexity of your financial needs grows too. Provestor’s Advisory Service is the next step for investors seeking a deeper level of support and tax expertise.