This article is for general information only and does not constitute financial or investment advice. Past performance does not predict future results.
The "best" area for BTL depends on your strategy. If you want maximum income, the highest-yield areas are in the North East and parts of the North West. If you want capital growth, the strongest recent performers are in Yorkshire and the Humber. If you want both, a handful of cities in the Midlands and the North offer a viable combination.
London, by most measures, is the worst place to start a BTL portfolio in 2026.
Yield by region
Gross yield is calculated as annual rent divided by average property price. Using ONS rental data (March 2026) and GOV.UK HPI price data (February 2026):
| Region | Avg monthly rent | Avg house price | Gross yield (approx) |
|---|---|---|---|
| North East | £772 | ~£162,000 | 5.7% |
| Yorkshire and the Humber | ~£830 | ~£210,000 | 4.7% |
| North West | ~£900 | ~£215,000 | 5.0% |
| East Midlands | ~£850 | ~£245,000 | 4.2% |
| West Midlands | ~£950 | ~£250,000 | 4.6% |
| South West | ~£1,150 | ~£310,000 | 4.4% |
| East of England | ~£1,250 | ~£330,000 | 4.5% |
| South East | ~£1,400 | ~£380,000 | 4.4% |
| London | £2,280 | £542,000 | 5.0% |
| Wales | £830 | £210,000 | 4.7% |
| Scotland | £1,022 | £187,000 | 6.6% |
These are broad regional averages. Individual cities and postcodes vary significantly. London's 5.0% gross yield is misleading because it includes areas ranging from 2.5% (prime central) to 7%+ (outer boroughs). Scotland's 6.6% reflects lower house prices rather than high rents.
Cities worth investigating
For yield (gross 6%+): Sunderland, Middlesbrough, Hartlepool, Burnley, Stoke-on-Trent, Bradford, Hull. Entry prices under £100,000 are common. Rents of £450 to £600 per month produce yields of 6% to 9%. The risk: lower capital growth, higher tenant turnover, and some areas have selective licensing.
For yield plus growth: Manchester, Leeds, Nottingham, Birmingham, Liverpool. Entry prices of £120,000 to £200,000. Rents of £700 to £1,000 per month. Yields of 5% to 7%. These cities benefit from employment growth, university populations, and infrastructure investment. Manchester and Birmingham have the added tailwind of BTR demand pushing up rental values.
For capital growth: The strongest recent price growth has been in Yorkshire and the Humber (3.9%), the North East (2.7%), and Wales (2.5%). These are also areas where values are furthest from their affordability ceiling, suggesting more room for growth than in London or the South East.
What to check before buying
Regional data gives you a shortlist. Local research narrows it down. Before committing to a specific area:
Check Rightmove and Zoopla for time-on-market (how long rental listings stay active). Short time-on-market (under two weeks) indicates strong tenant demand. Check whether the council operates selective or additional HMO licensing. Check local employment: is the area dependent on a single employer or sector? Check the local plan for planned housing development that could increase supply and suppress rents. Drive through the area at different times of day. The data does not capture antisocial behaviour, traffic noise, or the general feel of a neighbourhood.
The London problem
London offers high absolute rents but the lowest yields after costs. A £500,000 flat renting at £2,000 per month yields 4.8% gross. After mortgage interest (at 75% LTV), insurance, management fees, maintenance, and Section 24 tax treatment, the net return for a higher-rate taxpayer is often negative.
Prices are falling (down 3.3% year-on-year). First-time buyer demand has been hit by the return to standard stamp duty thresholds. Time to sell has increased. For income-focused investors, London does not work at current prices and mortgage rates.
Sources
- GOV.UK, "UK House Price Index for February 2026". https://www.gov.uk/government/news/uk-house-price-index-for-february-2026 [Accessed 6 May 2026]
- ONS, "Private rent and house prices, UK: April 2026". https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/privaterentandhousepricesuk/april2026 [Accessed 6 May 2026]
- Zoopla, "House Price Index: April 2026". https://www.zoopla.co.uk/discover/property-news/house-price-index/ [Accessed 6 May 2026]