Best Rental Yields in the UK 2021

Discover the highest rental yields in the UK per region, how to find the best rental yield and how to calculate yield on a rental property using our rental yield calculator (Updated June 2021)

What is a Rental Yield?

One of the most important metrics for an investor to consider is the rental yield they’ll receive. This is the returns you make on a property investment when the monthly rent is measured against the overall value of the property. Understanding the average rental yields in the UK for 2021 is vital for making an informed decision going forward.

Remember that the main two sources of income in a Buy-to-Let investment are the rental yield and the capital growth. These are very different terms that describe the two income streams a property can deliver.

Rental yield is based on you letting your property out to a tenant and what you can expect to earn, typically over a year.

Capital growth is your profit on a property purchase and is based on the natural rises that you may experience as property prices go up.

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What is a Good Rental Yield in the UK?

Rental yields can be impacted by a wide variety of different things and as such, no one yield is the same. As a whole, the average UK rental yield sits at 3.53%, so anything over that amount can be considered overperforming. Rental yields can change from postcode to postcode, so it’s important to keep researching investment locations to see which can offer the best returns. 

At SevenCapital, we typically look for locations that can offer long-term growth and high levels of tenant demand. This means identifying quality locations that are still relatively affordable. While rents in London are high, for example, so are property prices. This means in terms of rental yields, the capital is below average.

Instead, a savvy investor will look for relatively affordable properties in locations where demand is set to grow over time. These are considered ‘emerging locations’ and generally will command higher rents over time, building on your affordable property value to offer much higher yields.

Consider Birmingham, for example. Certain postcodes in the city centre are hitting 6% because while property is still less expensive in the second city, the amenities and opportunities available are attracting residents willing to spend more. Rental prices in the city are increasing and with it, the yields investors can expect.

Best Rental Yields in the UK 2021

After the unprecedented challenges of 2020, it’s expected that 2021 will be a transformative year for UK property. Demand has reached new levels and records are being broken seemingly every day. 

There’s plenty of opportunity for investors to jump back into the market, especially when many have been holding off on making a purchase. Unsurprisingly, our research has highlighted both fresh contenders and established locations forecasting excellent yields.

With this in mind, here are the average rental yields in the UK for 2021 and what we can expect to see going forward.

Region Average Price Average Rent Average Rent (p.a) Rental Yield
London £666,160 £1,575 £18,900 2.83%
South East £390,563 £1,065 £12,780 3.27%
South West £294,596 £910 £10,920 3.70%
West Midlands £228,092 £733 £8,796 3.85%
East Midlands £217,502 £689 £8,268 3.80%
East £340,503 £968 £11,616 3.41%
North East £185,546 £536 £6,432 3.46%
North-West £195,976 £766 £9,192 4.69%
Yorkshire & the Humber £178,441 £677 £8,142 4.56%
Wales £187,158 £673 £8,076 4.31%
Scotland £181,490 £687 £8,244 4.54%

As you can see, when we compare regional performance, there’s some stand-out results. London continues to offer below-average yields, mostly in part due to its incredibly high property prices when compared with the wider country. 

Similarly, the North-West leads the way, driven by exceptional regeneration projects and the London ‘exodus’ to the north where prices are less expensive. While these areas are typically predicting lower capital growth in our 2021 UK Market Forecast, there’s no doubt their yield performance is excellent. 

It’s important to remember however, that these are regional performances. Don’t be afraid to dig a little deeper into key locations, after all, cities such as Birmingham, Nottingham and Leeds are offering higher yields than most on this list despite their region’s apparent underperformance.

2021 UK Investment Guide

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With 2020 behind us, UK property continues to be a key investment asset for investors around the globe despite external factors. With regional cores still showing exceptional growth and London still relatively slow to recover, the UK Investment Guide covers everything you need to know about the UK property market in 2021.

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Expected Rental Growth in 2021

So we know the best rental yields UK for 2021 but what about the rental growth? Which locations in the UK are expecting to see the biggest growth in their rental prices? 

Rental prices are much more resilient than property prices, even in the face of crisis. During 2009 and the global financial crash, rents dropped by just 2% compared to house prices falling by 18%. Despite the challenges we’ve faced this year and can expect with the Brexit deadline, rental prices have shown their historical resilience.

According to Savills, rental prices will rise by double figures by the end of 2024, with the largest rises occurring in 2021.

While it’s true economic issues can stall rental payments and thus, yields, it’s common knowledge that demand can drive rental prices and there’s no shortage of demand at present. 

Savills also highlight that, while yields may fluctuate over the short-term, the market will readjust and there could be appealing opportunities for those willing to hold over the long-term.

Net vs Gross Rental Yields

A common question asked is: what is the difference between net and gross rental yields? Simply put:

Gross yield is everything before expenses.
Net yield is everything after expenses.

Both gross and net rental yields can be worked out in similar ways.

Gross Yield = (weekly rental price x 52) / property value x 100
Net Yield = (weekly rental price x 52) – costs / property value x 100


What Costs Are Involved in Property Investment?

When you’re working out your net yields, it’s vital to understand potential costs. These will vary depending on your investment style (are you more hands-off, or hands-on?) but ultimately, there are several mandatory costs you should take into account that will impact your net rental yield.

The main one to consider is your mortgage interest rate. Unless you’re a cash buyer, this will be your biggest expenditure and will typically be covered by your rental income – at least initially. 

Maintenance and service charges or ‘ground rent’ are the other compulsory payments and must be factored into your finances from the beginning. 

Then, depending on your investment style, you’ll need to consider letting fees, agent fees, insurance and other admin costs. 

If you’re a hands-on investor you may consider performing the letting and tenant handling yourself, which will save in the long-run. 

For many, this isn’t an option. If you’re investing from overseas for example, it can prove incredibly difficult to provide the necessary communication on a daily basis. This is where having experienced partners can help.