The bank has analysed 50 town and cities in the UK, looking at local property prices, the concentration of rental property and average rents, to come up with a league table of buy-to-let performance.
The results reveal that, with relatively low purchase prices, average rent of £901 and private rental accommodation making up almost a quarter of its housing stock, Southampton takes pole position. Rental yields in Southampton are 7.82%.
The relatively affordable property prices in Blackpool, Hull, Manchester and Nottingham place these cities in the rest of the top five, with yields of 7.81%, 7.77%, 7.60% and 7.55% respectively. In sixth place, Coventry is the only other city offering returns above seven per cent with a yield of 7.13%.
London does not score highly when it comes to yields – despite steep rents in the capital, sky-high purchase prices mean that rental yields are relatively low, although they vary from borough to borough. S
outhwark offers the highest yields and yet is only 13th overall, while Hammersmith and Fulham and Kensington and Chelsea are at the bottom of the league, generating returns of just 3.42% and 3.34% respectively, thanks to very high property prices in those areas.
Seaside towns feature near the top of the league tables, thanks to holiday rentals, with 17 of the top 50 areas found on the coast. Blackpool is the top yielding seaside town with a yield of 7.81%, followed by Bournemouth (5.81%), Brighton (5.48%) and Torbay (5.16%).
Peter Dockar, head of mortgages at HSBC said:
“Buy to let remains a good investment for those looking for above average returns. Twenty-three of the top 50 areas offer yields above 5%, significantly more than is available from more traditional savings options.
“However, 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 so it is key landlords do their research as often the most popular locations may not offer the best return.”
