"From a rental yield perspective, areas to target at the moment include locations in the north of the country as well as commuter cities "
- Francesca Carlesi - Molo
Digital mortgage lender, Molo, has conducted new research, using internal data to reveal where in England and Wales offers the highest and lowest rental yields.
Simply put, gross rental yield is calculated as annual rental income divided by property price. The study found that the current average rental yield for England and Wales is 4.98%.
According to the numbers, with a gross rental yield of 7.96%, the Central Valleys is the highest-yielding location in the UK for a buy-to-let property
Interestingly, when it comes to the top ten places for high rental yield, all of these are either in the North, Midlands or Wales.
The study has revealed that the Central Valley is one of the best locations across England and Wales for high rental yields. The gross rental yield in the area is 7.96%, which is almost double the national average.
The average monthly rental income in the area is £697, which is relatively low compared with other areas, while average property prices in the Central Valleys are within the 10 lowest in the country, at £100,786.
Following very closely behind as one of the best locations across England and Wales for high rental yields are Hartlepool and Stockon-on-Tees in the North East of England.
Gross rental yields in the area are only slightly below the Central Valleys, at 7.90%. While average monthly rental income is over £100 less than in the Central Valleys, at £592, and the average property values are also significantly lower, at £85,774.
The third best place for rental yield is another area in the North East, South Teesside, which sees a gross rental yield of 7.66%. Swansea (gross yield of 7.30%) and Coventry (gross yield of 7.06%) round off the top five ranking places in the UK for rental yield.
CEO at Molo, Francesca Carlesi comments: “From a rental yield perspective, areas to target at the moment include locations in the north of the country (with low property prices and high rental prices), as well as commuter cities (with a high demand for properties). However, it’s important to also consider fast-growing cities or university areas which will allow a steady stream of tenants and have strong capital investment growth.”
Camden and the City of London is the lowest-yielding location, with average gross rental yields at 3.58%
With a gross rental yield of 3.58%, which is one-third less than the national average, Camden and the City of London has been revealed as the lowest-yielding rental location for buy-to-let property. While average monthly rental income is one of the highest on the list, at £2,268, the average property price is very expensive here too, at £672,104 – the sixth highest on the list.
West Essex is another area that has a low rental yield, meaning it can be difficult to make a profit on a buy-to-let property, with a gross rental yield of 3.64%. The average monthly rental income is relatively high compared to the national average, at £1,800, but property prices are expensive in the area, at £548,000.
Dorset (gross yield of 3.67%), Bromley (gross yield of 3.69%), and North Yorkshire (gross yield of 3.70%) round off the top five lowest-yielding areas in England and Wales.
Vice President of Strategy at Molo, Mark Michaelides suggests how landlords can improve their rental yield:
"While the rental yield plays a central role in your returns, it is determined primarily by location. Landlords looking for additional ways to maximise rental income may consider home improvements, such as a new bathroom, kitchen or extension, which can increase both the rental potential and overall value.
"Making your buy-to-let more energy efficient is another way to boost rental income, as it may make the property more desirable to tenants due to lower energy bills.”