The Daily Mail looks at the figures for returns generated by buy-to-let properties around the UK, and rounds up some of the best.

Are you considering investing in buy-to-let property? With rising mortgage rates, challenging regulations, and a less generous tax regime, many landlords are finding it increasingly difficult to make a good return. But fear not, as there are still opportunities to secure close to double-digit yields in certain areas of the country. In this article, we’ll explore the buy-to-let hotspots where yields are climbing and explain why they’re worth considering for potential investors.

Best Yields

1. Yield Resilience in Glasgow and Surrounding Areas:
   According to data from property portal Zoopla, areas around Glasgow in Scotland, including West Dunbartonshire, Renfrewshire, East Ayrshire, and North Lanarkshire, offer buy-to-let yields of eight percent or higher. Renfrewshire and West Dunbartonshire have witnessed significant yield increases of 13 percent and seven percent respectively in the past year.
2. Affluent London Boroughs with Low Yields but Rising Returns:
   While yields in affluent London boroughs like Kensington and Chelsea, Richmond upon Thames, and Westminster are among the lowest in the country (under 4.5 percent), they have seen substantial yield growth. Yields in these areas rose by nine percent, 11 percent, and 13 percent respectively in the past year.
3. The Landlord Exodus:
   Recent years have seen tens of thousands of buy-to-let landlords selling up due to the challenging property market conditions. Rising mortgage rates, onerous regulations, and the withdrawal of valuable tax reliefs since 2018 have contributed to this trend. However, as landlords sell their properties, the scarcity of rental properties increases, ultimately boosting yields for those who remain invested.
4. Factors Driving Yield Growth in Glasgow:
   Glasgow, in particular, has experienced substantial rental growth, with a 33.5 percent increase since March 2020. Demand for rental properties in Glasgow has been driven by factors such as the expansion of Glasgow University, which brings in many new people looking for accommodation. Additionally, companies like Morgan Stanley and Barclays expanding their workforce in the city have led to increased demand for rental properties. Glasgow’s popularity as a tourist destination has also fueled demand for Airbnb rentals.
5. Importance of Balancing Yields and Capital Growth:
   To make a profit from buy-to-let, landlords look for properties that can deliver both attractive yields and capital growth. While high-yield areas tend to have lower property prices and strong employment markets, finding areas that offer both high yields and high capital growth is challenging. Investors should carefully research and understand the unique metrics of each location, street, and property.
6. Challenges in the Market:
   Despite the potential for high yields, making a good return in the buy-to-let market remains challenging. Running costs, such as energy efficiency upgrades required by 2028, eat into returns. Moreover, soaring buy-to-let mortgage rates have decimated profits for landlords seeking to remortgage. With rates rising significantly, it is almost impossible to generate a profit in most areas unless properties are owned outright or have substantial equity.
7. Lender Affordability Rules and Increasing Pressure:
   Some lenders are tightening affordability rules for landlords, requiring them to demonstrate higher rental incomes and repayment capabilities. These rules add further pressure to landlords, as failing to meet income requirements can render a property unmortgageable, potentially leading to eviction or forced sale.

Conclusion

Although the buy-to-let market faces challenges, there are still bright spots where investors can earn an inflation-beating income. Glasgow and surrounding areas offer resilient yields, thanks to a growing employment market and increased demand from students, professionals, and tourists.

While London’s affluent boroughs may have lower yields, they have seen significant increases in returns. Ultimately, investors must carefully consider the balance between high yields and capital growth when selecting investment properties. Although the market remains tough, with rising mortgage rates and stricter regulations, potential investors can still find profitable opportunities by conducting thorough research and staying informed about market conditions.