Landlords who own properties in coastal towns and cities achieve the best rental yields, according to a new report.
Research from HSBC Bank suggests that buy-to-let properties in Southampton, Kingston-Upon-Hull, and Blackpool are proving lucrative, with returns of almost 8%. Non-coastal cities, such as Manchester and Nottingham are not far behind.
Seaside Towns Offer Highest Yields for Landlords
Head of Mortgages at HSBC, Peter Dockar, said that irrespective of location, “buy-to-let remains a good investment for those looking for above-average returns.” Mr Dockar continued: “23 of the top 50 areas offer yields above 5%,” buy-to-let returns can be “significantly more than is available from more traditional saving options.”
Despite advocating buy-to-let in general, Dockar believes that the findings suggest “it is clear there is a fine line between a property in a desirable area, the rents that can be achieved and the returns that can be yielded.” Taking London as an example, it appears that Dockar is speaking sense, with the capital not even in the top ten best places for rental yields.
High property prices have led HSBC to describe London’s rental yields as “relatively modest.” The best returns came in the borough of Southwark, where the average property price is £401,405. Average rents in the borough are £2,058, leading to a yield of around 6%. This already good rental return looks even better in comparison to areas such as Kensington, where property prices in excess of £1m lead to rental yields of just 3%, the lowest in the capital.
With landlords searching for maximum returns on their investment, tenants are having to pay record high rental costs. Increased demand for rental properties have seen rents soar to an average £1,106 per month in London, according to figure from LSL Property Services. Properties are on average £81 more expensive than they were 12 months ago. 
David Newnes, director of LSL, said: “Rents in London are red-hot.”
He continued: “In spite of the unseasonal weather the rental market has gained some ground.’ Newnes then said: “Over the next few months, it looks likely the spring bounce will continue.”