England’s top three rental hot spots are all in the north of England, while the worst rental returns are in London, according to new research.
Manchester, Hull and Blackpool snatched the top three places in the HSBC survey of rents and yields, while Forest Heath, Suffolk, surged ahead of the competition with an a year-on-year explosion of almost 39%.
In Manchester, rents and house prices notched up small increases during the past year, but a strong rental demand kept the buy to let market buoyant.
Rents rose 4% from £8,316 a year ago to £8,628, while prices were up from £104,244 to £108,870.
The city has one of the largest student populations in Europe and a private rented housing stock of 27% of all homes.
Strong rental demand and low house prices drove up yields in Hull and Blackpool, said the bank.
Average home prices in Hull are £69,135, while those in Blackpool are £79,654.
In Forest Heath, Suffolk, average house prices jumped from £158,925 to £171,322 as rents soared from £8,316 to £12,432. Thanet, Kent, had the second best yield increase of 20%, while Hastings, Sussex, was third place with 8%.
Tower Hamlets is the London buy to let hot spot for annual yield growth. Returns for landlords were up 1.2%, while rents have risen by 18% to £20,496. House prices increased from £414,461 to £481,745 over the same period.
The borough takes in much of the redeveloped London docklands, including Canary Wharf.
However, Newham is still the best place for buy to let in the capital with a rental yield of 5.20%.
Property prices are low for London, but yields still declined by more than 13%.
Tracie Pearce, head of mortgages at HSBC, said: “Our research shows buy-to-let remains an attractive option for investors, but it’s important they focus on locations where rents have outpaced house prices.
“This means not just looking at large towns and cities, but also commuter areas and those with high rental demand and concentrated employment such as a hospital or university nearby. Almost a third of areas in our report have seen a year-on-year growth in yield and almost half of the areas have achieved yields above 5%.”