Best Rental Yields in the UK 2026

For both seasoned and new investors, property yield is one of the most critical metrics to evaluate. By measuring annual rental income against the property’s overall value, rental yield becomes crucial for estimating your investment returns. A strong understanding of how to calculate property yield and interpret property yield data empowers you to strategically build a potentially lucrative portfolio by targeting locations with the best rental yields in the UK.

Property investment offers two primary income streams: capital growth and rental income. While capital growth can deliver a significant ‘lump sum’ upon property sale, rental income provides a more consistent and reliable revenue stream. This consistency underscores the importance of understanding rental yields for investors focused on cash flow and long-term financial stability.

Fundamentally, the property yield calculation is based on the annual rental income generated by a property, compared to its purchase price. This simple yet powerful calculation helps investors quickly assess and compare potential investment opportunities.

Capital growth, conversely, is a longer-term metric reflecting profit from property appreciation over time, influenced by market cycles and natural price increases. While important, it is often less predictable in the short term than rental income.

The market in 2026 is characterised by a significant re-balancing. Years of high tenant demand coupled with tighter supply and rising interest rates have pushed rental growth far ahead of house price growth in many areas, driving rental yields upwards.

For the purpose of benchmarking your investment strategy, a yield exceeding the national average is generally considered a strong return in the current market.

The estimated average rental yield across the UK in late 2025/early 2026 stands at approximately 5.96%. This is based on an average rent of £1,354 and an average house price of £273,000 according to the ONS in October 2025.

Therefore, any rental yield exceeding 5.96% can be considered a high yield in the current environment.

The highest average UK rental yields are consistently observed in areas with two key attributes: robust tenant demand and comparatively affordable property values relative to achievable rents. This principle explains the continued rise of Northern and Midlands cities as high-yield property investment hotspots.

As the market continues to recalibrate, regional city cores are taking the lead in delivering some of the best rental yields in the UK. The easing of Bank of England base rates in 2025 has led to a reduction in buy-to-let mortgage rates, bringing a greater degree of stability and confidence back to the investor market for 2026.

The Rise of the Regional Hotspots

The trend of tenants seeking better affordability and quality of life outside the capital is accelerating, often referred to as the ‘London exodus’. Improved rail and digital connectivity is fueling this dispersal of economic activity, strengthening regional employment and, in turn, tenant demand.

The North West, Wales, and the North East are currently exhibiting the strongest regional yields, primarily due to their accessible entry prices combined with resilient rent increases. The strategic focus for 2026 is on cities and postcodes benefiting from:

Major Regeneration Projects: Large-scale schemes that transform city centres, create jobs, and attract professional tenants (e.g., Manchester’s Victoria North, Birmingham’s Future City Plan).

Growing Economic Clusters: Hubs for high-growth sectors like tech, media, and finance (e.g., MediaCity in Manchester, the BBC hub in Birmingham).

Strong Student Populations: University cities that drive high demand for House in Multiple Occupation (HMO) properties, which often deliver significantly higher gross yields.

The table below is a guide to regional performance, based on the latest market data from the ONS and HomeLet for the second half of 2025 and projections for 2026:

Updated for November 2025

As previously noted, London continues to experience below-average rental yields, primarily due to the city’s exceptionally high property prices relative to achievable rents.

The ‘London exodus’, driven by tenants seeking affordability and lifestyle changes, has significantly contributed to the city’s yield underperformance. Many are relocating from the capital to smaller cities and suburban areas. The ongoing development of HS2 is expected to further accelerate this trend in the coming years, as improved high-speed commuter routes make living outside London while working there increasingly viable.

Consequently, regional city cores are taking the lead in delivering some of the best rental yields in the UK. Fueled by substantial regeneration projects and expanding employment bases, these cities are mirroring the investment success seen in areas like Birmingham property investments.

For investors aiming for high-yield property, understanding rental growth forecasts is as essential as the current yield. Strong projected growth ensures your yield not only remains competitive but also increases over time.

Forecasters predict that rental growth will continue to outpace house price growth in many regional markets over the next five years, further solidifying the attractive yields in these areas.

Spotlight Cities for Rental Growth:

• Manchester: Looking ahead, we anticipate that Manchester property values shall rise by 4.5–7% between May 2025 and May 2026, which will be followed by 4–6% the following year. The growth is projected to be 4–5.5% in 2027–28, 3.5–5% in 2028–29, and 3–4.5% by 2029–30, cementing its position as one of the most compelling places to invest in the UK for 2026.
• Birmingham: From May 2025 to May 2026, property prices in Birmingham are expected to rise by 5–7%, before moderating slightly to 4–6% between May 2026 and May 2027, according to Joseph Mews’ predictions. Growth is then projected to average 4–5% from May 2027 to May 2028, easing to 3–5% between May 2028 and May 2029, and finally settling at a sustainable 3–4% between May 2029 and May 2030.
• Emerging ‘Second Cities’: The fastest yield growth is being seen in smaller cities that offer accessible property prices combined with expanding economies. Bradford, Liverpool, and Leicester have emerged as frontrunners, driven by affordable entry points and significant local regeneration initiatives, making them key locations to watch in the East Midlands and North of England.

If you’re asking “what is a good rental yield?”, understanding its calculation is crucial. You now appreciate the importance of this metric for evaluating property investments, but how do you calculate property yield accurately?

Rental yields are broadly categorised into gross yields and net yields. Both are essential for comprehensive financial planning, but provide different perspectives on profitability.

Gross yield represents your returns before accounting for any property-related expenses. Net yield, considered a more precise metric, reflects your actual returns after deducting all relevant costs.

The formulas for calculating these yields are straightforward:

Gross Yield = (Annual Rental Income ÷ Property Value) x 100

Net Yield = (Annual Rental Income – Property Costs) ÷ Property Value x 100

You can also use a buy-to-let calculator yield tool online to quickly estimate these figures.

While gross yield provides a quick overview, net yield offers a more realistic picture of your investment returns. To accurately calculate net yield, you need to comprehensively understand the potential costs associated with property investment. These costs will vary based on whether you adopt an active or passive investment approach, but certain mandatory expenses will invariably impact your net yield.

Mortgage payments are a primary consideration, particularly for investors financing their buy-to-let property purchase with a mortgage. While often covered by rental income, mortgage costs represent a significant expense.

Other essential costs to factor in include service charges and ongoing maintenance expenses. These should be carefully estimated and accounted for in your financial projections before investing.

Your role as an active or passive investor will determine additional financial commitments. For instance, passive investors typically need to incorporate agent fees and property management costs from the outset. These fees can significantly affect long-term returns.

Active investors who self-manage their properties avoid these agent fees, potentially enhancing their net yields over time. However, overseas investors or those preferring a hands-off approach may find the passive investment model, with associated costs, more suitable.