Rental Yields in the UK 2025

For investors, rental yields are one of the most important metrics to consider. Measuring annual rental income against the overall value of your property, this metric is crucial for estimating your returns. Understanding rental yields will also allow you to build a potentially lucrative portfolio by choosing locations with the best rental yields in the UK. 

Property investment offers two main sources of income – capital growth and rental income. While capital growth can provide you with a ‘lump sum’ on the sale of your property, rental income will be the more consistent revenue stream, which is why understanding rental yields is so important for investors. 

Fundamentally, rental yields are calculated based on how much rent your property earns over a year and is compared against the price of the property. 

On the other hand, capital growth is more of a long-term measurement. This is the amount of profit you make on the sale of your property based on market cycles and natural price increases over time.

The average UK rental yield as of 2024 is 5.37% based off an average rent of £1,271 and average house price of £284,000, meaning anything above this can be considered a high rental yield. 

However, other sources suggest the average rental yield could be closer to 4.75%, however with rental prices across the UK seeing huge increases as demand has risen over the past 12 months, it’s no surprise that yields have also experienced steep growth.

Overall, the best average UK rental yields are typically in areas that have strong demand for residential property and higher rental prices.

Investors should also be looking for affordable locations that have the amenities to support higher rents, as these areas can provide much higher average rental yields.

This is why cities such as Manchester, Derby and Birmingham have been recognised as high yield property investment hotspots – they’re more affordable than cities such as London but still maintain relatively high rents and thus, yields.

Savvy investors can use a UK market forecast to find affordable areas that are showing good capital growth, future redevelopment and strong tenant demand – meaning an investment that delivers higher rental yields while growing in value over time.

These pockets of potential high yield property investments are dotted around the UK and often come in the form of smaller ‘regeneration hotspots‘ instead of bigger cities. While locations such as London might have sky-high rents, the property prices are just as high, reducing the yield power.

Every new year comes with a new investment opportunity and inevitable changes to where the best rental yields in the UK are.

Much of this is driven by the pervasive issue of high demand and low supply, paired with consecutive rises to the Bank of England base rate. This combination has reduced the number of available rental units whilst also driving up buy-to-let mortgage costs which, in-turn, has led to an increase in rents and therefore rental yields. In fact, a Zoopla report revealed that 21 tenants will compete for just one rental property, demonstrating the extent of this supply-demand imbalance which is driving up rents and impacting yields across the UK.

As tenant demand increases in many of the UK’s major cities, we’re seeing a number of new locations emerge that offer the UK’s best rental yields.

For those that want to invest in property for capital gains, we have used a combination of Rightmove and HomeLet data to determine the regions with the best rental yields in the UK:

Updated for October 2024

As we have previously mentioned, London continues to achieve below-average rental yields, largely due to the city’s extortionately high property prices and rents. 

The London ‘exodus’ has been a significant contributor to the city’s underperformance, which has seen many tenants flee the capital for smaller cities or suburban spots. With HS2 on the way, we anticipate that even more Londoners will leave the capital in the next few years as working in London but living elsewhere will become more feasible thanks to viable high-speed commuter routes.

With this in mind, it’s no surprise that regional cores are leading the way with some of the best rental yields in the UK. Strengthened by extensive regeneration and a growing employment base, these cities are following closely in the footsteps of Birmingham property investments.

Understanding which locations are forecasting the best rental yields in the UK is crucial for planning your next investment.

As suggested above, the popularity of London for both investors and tenants is waning, especially as opportunity begins to spread more evenly across the country. It is no longer paramount that successful businesses start in the capital, or that ambitious employees must flock to London to enhance their career. MediaCity in Manchester is making the north the go-to destination for digital media, and Birmingham’s new BBC hub in Digbeth makes the second city a strong contender for media and arts careers. London is no longer the place to be, but one of many. 

We have also pinpointed areas of growth across the UK, especially in the East Midlands. Leicester and Derby continues to be places to watch thanks to their more affordable property prices and exciting redevelopment which is pulling in tenants from across the nation. Savills suggest that the broader East Midlands will see 22.8% property price growth to 2028.

Larger cities such as Birmingham and Manchester will also maintain their reputation as some of the most lucrative places to invest in buy to let property. Some regions in Manchester achieve rental yields of 10.1%, and we anticipate that this will only improve over time as the city undertakes huge redevelopment. Schemes such as NOMA and MediaCity will employ thousands, generate millions for the city, and enhance demand to live in the city. With JLL suggesting that Manchester will see cumulative rental growth of 21.7% from 2024 to 2028, it’s no wonder this northern powerhouse city is one of the most popular places to invest.

The same can be said for Birmingham, where the population is expected to soar to 1,240,000 by 2030 as new opportunities bring people from across the globe into the UK’s second city. JLL predict that the city will see a cumulative rental price growth of 22.2% between 2024 and 2028, demonstrating just how impressive and buoyant the city’s rental market is. With an anticipated 4,000 new homes needed in the city every year to keep up with demand, but only 1,000 being built, Birmingham is experiencing quite the supply-demand imbalance which has been driving up rents and house prices for years, keeping yields stable and pinpointing Birmingham as a reliable place to invest.

If you came here asking, ‘what is a good rental yield?’ you’ll  now know the importance of this metric, but how exactly do you work out a rental yield?

Rental yields are split into net yields and gross yields, both of which are crucial for your financial planning.

Generally speaking, a gross yield includes your returns before any expenses have been paid. A net yield, however, is arguably a more accurate metric, which gives you an idea of your returns after you’ve paid your expenses.

You can work these yields out using a similar equation:

Gross yield = annual rental price / property value x 100

Net yield = annual rental price – costs / property value x 100

Net yields typically offer a more accurate account of what your returns will be, but to be able to work out this number, you’ll need to understand the potential costs involved. Naturally, these costs differ depending on whether you’re an active or passive investor, but either way you should prepare for multiple mandatory costs that will inevitably impact your net yield.

The first thing to consider is your mortgage. For those who are looking to get a mortgage in order to purchase their buy-to-let property, this will likely be the biggest cost to consider, although it is usually covered by rental income.

Other compulsory payments include service charges and maintenance costs, which will need to be noted before you begin investing.

Your position as an active or passive investor will then determine any other financial commitments. For example, if you want to be a passive investor, you’ll need to factor in agent fees and admin costs from the outset.

Active investors won’t need to consider these costs which can often make a significant difference on returns in the long-run, but if you’re an overseas investor, you probably won’t have the opportunity to play an active role in your investment.