Investing in property in the UK? Find out what is a good rental yield
The UK keeps playing a major lead in Europe, and its stable economy and cosmopolitan cities thriving with action and working opportunities keep on seducing people from all over the world, predicting that buy-to-let will continue to be a safe bet.
Are you new to property investment or getting ready to take the big leap? As time-consuming and as stressful as it can be, buying property is still one of the safest things you can do with your savings – if done correctly, so start now studying what are the best cities to invest in.
Table of contents
- Where is the best place to invest in property in the UK?
- What is a good rental yield in the UK?
- Why buy property in the UK?
- Is buying property a good investment in the UK??
- Can foreigners buy property in the UK?
- What is UK’s tax on rental income?
1. Where is the best place to invest in property in the UK?
Even though the UK’s stable economic environment is very reassuring if you’re buying property as an investment strategy, knowing where to find the best rental yields is the game-changer that will turn your savings into profit.
Whether you’re an experienced entrepreneur or a newbie planning to boost your savings, you may want to consider our top picks of the cities best worth your investment.
Buy to let Edinburgh
- 5.89% annual yield
- £268,989 Average property price
The increase of brand new residential buildings in the city center creates a great opportunity for buy-to-let investors in Edinburgh. The economy is expected to rise, which sure will translate into rental price growth. Students, tourists, and families are a broad market to take into account when developing a property investment strategy in Edinburgh.
Buy to let London
- 4.6% annual yield
- £672,390 Average property price
The UK’s capital, and the world’s leading financial centre, attracts residents from all parts of the globe. House prices increase by the day and renting is in such a high demand that will always be a reliable source of income. Be aware that yields are lower in the big cities, where everything costs more, including your property expenses.
If you’re looking to buy an apartment in London, and want to short-let it to ensure maximum flexibility for your own convenience, check our short-term rentals guide in London.
Buy to let Glasgow
- 5.31 % annual yield
- £204,007 Average property price
Scotland’s most populated city is finally beginning to live by its potential. A bursting cultural scene, a flourishing economy, and a booming student population have led to huge rental demand, turning Glasgow into a buy-to-let paradise. Sale prices are rising and rental returns are highly increasing in one of the most affordable places in the UK.
Buy to let Birmingham
- 5.9 % annual yield
- £214,500 Average property price
Forecasts for property investment in Birmingham are quite promising, as the average rent price is expected to rise 12% for the next five years. The city is in continuous transformation and is affordable enough to attract and retain young professionals. Companies have found solid ground and new talent keeps moving from London. One or two-bedroom apartments rule the market and are a great deal, especially if served by the transportation network.
Buy to let Manchester
- 6.5 % annual yield
- £214,500 Average property price
If you’re looking to invest in residential property in the North of England, Manchester may be a more suitable option than London, with a lower cost of living and an enticing 6.5% yield. Host to many start-ups, the city has been watching its population and economy expand. These two factors, in conjunction with an on growing employment rate, determine the affluence of new residents, the student community, and tourism. With them, comes the demand for housing, and the potential increase in the earnings of your property investment in Manchester.
Buy to let Nottingham
- 5.97% annual yield
- £188,609 Average property price
If your investment strategy aims at student accommodation, Nottingham is where you should put your money. Home to two major universities (Nottingham Trent University and the University of Nottingham) and one of the biggest teaching hospitals in the UK (Queens Medical Centre), the city shows a great need for student housing. In case you’re looking for long-term tenants, affordability has also been a key factor in Nottingham’s rising population, contributing to a growing demand for rentals.
Buy to let Leeds
- 6.3% annual yield
- 220.000€ Average property price
Leeds is a top destination for the ones pursuing investment opportunities in the long-term rental. Property prices are low and rental is up to speed, providing landlords with significant incomes, especially considering that the majority of the population tends to rent instead of buy. This trendy city, famous for its nightlife and cultural offer, is also known for a very strong financial quarter.
Buy to let Liverpool
- 6.43% annual yield
- £164,550 Average property price
Property prices are estimated to rise by 28% over the next four years. This prevision gives Liverpool an advantage point as a prospective rental hotspot. Central postcodes are delivering the best rental returns and the yields on properties close to the Royal Liverpool University Hospital can even go up to 10%. The city’s bet on renovation is a very ambitious project that will for sure boost its potential, leading to a very auspicious future for investors.
2. What is a good rental yield in the UK?
Yields fluctuate across the UK and even in the same city or region, depending on the postcode. Location, surrounding amenities, and prestige will determine rental prices and play a huge role in your revenue.
In the UK, a good yield is somewhere between 5% and 8%. Beware that London is a completely different scenario and that anything above 5% is considered a pretty good decent yield. For bigger yields, you should consider student housing. Smaller studio apartments are a cheaper investment and the perfect match for students and young professionals trying to establish themselves in a new city.
3. Why buy property in the UK?
Buying property in the UK is a good investment because of the disparity between offer and demand. House prices are still affordable for buyers, but the demand for renting seems to keep on increasing at a fast pace. This is noticeable mainly in cities in continuous development and renovation, with high quality of living and good employment rates.
In comparison to other European countries, investing in property is much easier for foreign citizens, thanks to the benefits of a much more liberal economic policy. You won’t need British citizenship or a permanent residence permit. There are no real limitations of ownership rights for overseas investors. In fact, they share the exact same rights and obligations as the British.
As for returns, a strong well, and established economy, with the UK securing its position as Europe’s business-leading destination, sustains a very stable investment background.
4. Is buying property in the UK a good investment?
Investing in property is more reliable than buying shares or cryptocurrency, particularly in the UK, where the real estate market is as safe as it can be. Low-interest rates and an escalating demand keep property investment a highly profitable strategy.
Recent major events, such as COVID-19 and Brexit, appear to have left the sector virtually unscratched. As a matter of fact, 2021 shows record numbers regarding house prices and rental yield growth. Forecasts suggest this trend will continue in the coming years, with a 21.5% growth being expected by 2025.
5. Can foreigners buy property in the UK?
Overseas investors are welcome to buy property in the UK, and they don’t need a visa to do so. Of course, getting a mortgage is a much more thorough and time-consuming process if you are not a resident. But considering you’re dealing with a safe market, and that the sterling pound has been hitting a low, it sure is worth the effort.
6. What is UK’s tax on rental income?
The tax you pay from renting your property may fluctuate depending on how much you are profiting as well as on your own individual circumstances. Either you don’t make enough revenue to pay your taxes or pay tax at a rate of 20%, 40%, or 45% on your rental income. To calculate your rental income, you must subtract any allowable expenses from your total income. That said, do not forget to deduct costs of loan interests, mortgage, insurances, maintenance (not including improving works), utility bills, and professional services.
Long-term, mid-term, or short-term?
Short-term rental is the perfect option for property owners in cities with all-year high tourism rates, higher rental rates, and flexibility.
Long-term rentals are a good solution for residential areas, renting big three and four-room houses for families, and smaller apartments for single tenants.
Is your property located close to a university? Students will assure you a minimum of 12 months of rent, and they may even increase their stay for the whole duration of the graduation or even further.
It is fundamental that your returns cover all your expenses, so you can make the most of your profits. Bearing that in mind, you must choose the renting modality that better fits your purposes.
Looking to buy investment property in the UK? Schedule a call with our experts in property investment and find out what are the estimated returns of the properties you’re interested in.