Best UK Locations for Buy-to-Let Investment in 2026: New Data Reveals Highest Rental Yields

Where are the best places to invest in UK rental property?

Property investors searching for strong rental income may find opportunities outside London's traditional investment hotspots.

New figures published in October 2026 show that several regions in northern England and the Midlands are delivering higher average gross rental yields than London and the South East.

According to Paragon Bank's latest buy-to-let research, the national average gross rental yield reached 7.22% in the third quarter of 2026.

The result represents the highest average recorded since 2011.

However, regional differences are substantial.

Which UK regions offer the highest rental yields?

The latest Paragon figures identify the following regional performance:

Region	Average gross rental yield
East Midlands	8.10%
North East and Yorkshire	8.02%
Scotland	7.95%
South East	6.58%
London	5.79%
UK average	7.22%

The East Midlands recorded the strongest average yield among the regions highlighted in the research.

London recorded the lowest figure.

These results suggest that investors prioritising rental income may need to consider areas where property purchase prices are lower relative to achievable rents.

Why does the East Midlands perform strongly?

The East Midlands combines several characteristics that can support rental investment.

The region includes major employment centres, universities, transport connections and established residential markets.

Cities such as Nottingham, Leicester and Derby provide different types of rental demand.

Nottingham has a substantial student population alongside professional rental demand.

Leicester combines university-related demand with employment across several industries.

Derby has established employment activity associated with engineering and manufacturing.

However, investors should not assume that every neighbourhood in these cities produces the regional average yield.

Rental performance depends on the purchase price and achievable rent of the individual property.

North East England and Yorkshire

The North East and Yorkshire also feature prominently in the latest figures.

Their combined average gross yield of approximately 8.02% indicates that rental income can represent a relatively large proportion of property values.

Potential investment markets include Newcastle, Sunderland, Middlesbrough, Leeds, Sheffield and Hull.

These locations have different economic characteristics and tenant markets.

For example, a city-centre apartment aimed at professionals may behave differently from a family house in a suburban neighbourhood.

Similarly, a student HMO near a university will have a different operating model from a conventional two-bedroom rental property.

Investors should therefore avoid comparing properties based only on city-wide averages.

Scotland remains competitive

Scotland's average gross yield of 7.95% also places it among the stronger-performing markets.

Cities such as Glasgow, Dundee and Aberdeen may attract investors researching rental opportunities.

However, Scotland has a distinct legal and regulatory framework.

Landlords must understand Scottish tenancy rules, registration requirements and applicable property standards.

A property investment strategy developed for England cannot simply be transferred to Scotland without considering those differences.

Why are London rental yields lower?

London remains one of the UK's most important residential property markets.

However, high property prices can reduce gross rental yields even where monthly rents are substantial.

Consider two hypothetical investments.

Property A: London

Purchase price: £500,000

Monthly rent: £2,400

Annual rent: £28,800

Gross rental yield:

£28,800 ÷ £500,000 × 100 = 5.76%

Property B: Northern England

Purchase price: £160,000

Monthly rent: £1,050

Annual rent: £12,600

Gross rental yield:

£12,600 ÷ £160,000 × 100 = 7.88%

The northern property produces less total rental income but offers a higher gross yield relative to its purchase price.

These examples are illustrative rather than representative of particular local markets.

Higher yield does not always mean better investment

An investor should not automatically select the region with the highest average rental yield.

A high-yield property may also have:

• Higher maintenance requirements

• Lower potential capital appreciation

• Greater tenant turnover

• Weaker resale demand

• Higher insurance costs

• Additional licensing obligations

For example, an older property purchased at a relatively low price may require substantial refurbishment.

If those costs are excluded from the yield calculation, the investment may appear more attractive than it really is.

What about capital growth?

Rental yield is only one component of property investment performance.

Capital growth refers to an increase in the property's value over time.

A property purchased for £200,000 and later sold for £240,000 has experienced a £40,000 increase in value before selling costs and tax.

However, property values can also fall.

Investors should therefore assess both rental income and long-term market prospects.

How to identify a good buy-to-let location

A useful location assessment should examine several factors.

Employment

Areas with diverse employment opportunities may support more stable rental demand.

Transport

Properties close to reliable transport links may attract a wider range of tenants.

Education

Universities and colleges can support student accommodation demand.

Affordability

The relationship between local incomes and rents influences tenant demand.

Housing supply

A substantial increase in competing rental properties may affect achievable rents.

Local regulation

Licensing requirements and planning restrictions can influence investment costs.

Property condition

Older properties may require higher maintenance expenditure.

What does the latest housing-market slowdown mean?

Recent market reporting indicates that buyers may have more negotiating power in parts of the UK.

Propertymark figures published during October suggest that 86% of sellers have been accepting offers below their asking prices.

For investors, this may create opportunities to negotiate purchases.

However, an accepted offer below asking price does not necessarily represent a below-market-value purchase.

The property's actual market value should be established using comparable transactions, condition assessments and professional valuation where appropriate.

How mortgage rates affect regional investment decisions

Higher mortgage rates can reduce the profitability of rental properties across all regions.

An investor purchasing a property with an 8% gross yield may still experience weak cash flow if financing and operating costs are excessive.

For this reason, investors should calculate net operating income and financing costs before committing to a purchase.

A property should ideally remain financially sustainable under a range of reasonable scenarios.

What about HMO investments?

Some investors seek higher rental income by purchasing houses in multiple occupation.

This can be particularly relevant in university cities and areas with demand for shared accommodation.

However, HMO investments involve additional considerations.

These include licensing, fire safety, management and potential planning restrictions.

Investors should also account for the cost of converting a conventional residential property into suitable shared accommodation.

A practical investment comparison

Consider two hypothetical properties.

Investment factor	Property A	Property B
Purchase price	£180,000	£250,000
Monthly rent	£1,200	£1,400
Annual rent	£14,400	£16,800
Gross yield	8.00%	6.72%

Property A offers the stronger gross yield.

However, Property B might still be preferable if it has lower operating costs, stronger tenant demand or better long-term capital-growth prospects.

The comparison demonstrates why rental yield should be considered alongside other investment factors.

Should investors focus on cities or smaller towns?

Both can offer opportunities.

Major cities may provide broader employment markets and more diverse tenant demand.

Smaller towns may offer lower purchase prices and potentially stronger yields.

However, some smaller markets may have lower transaction volumes or more limited resale demand.

Investors should consider the ease of selling a property as well as the income it generates.

What should investors research before buying?

Before purchasing a rental property, investors should establish:

1. The realistic market value.

2. Achievable monthly rent.

3. Expected vacancy periods.

4. Mortgage costs.

5. Maintenance requirements.

6. Local licensing obligations.

7. Property management expenses.

8. Tenant demand.

9. Comparable property transactions.

10. Potential resale demand.

The strongest investment decisions are based on local evidence rather than national rankings alone.

Conclusion

The latest Paragon figures highlight the continuing importance of regional differences in UK property investment.

With average gross rental yields reaching 7.22% nationally, the buy-to-let sector continues to offer income opportunities.

The East Midlands, North East and Yorkshire, and Scotland stand out in the latest regional data.

However, investors should not interpret regional averages as guaranteed returns.

The best buy-to-let location is the one where purchase price, rental demand, operating costs and long-term prospects combine to support the investor's objectives.

Related articles

• What Is Rental Yield and Why Does It Matter?

• How to Analyse a Rental Property

• Below-Market-Value Properties: A Beginner's Guide

• How Much Money Do You Need for Buy-to-Let?

• Flats vs Houses: Which Is Better for Property Investment?

Disclaimer: Regional rental yields are averages and do not guarantee the performance of individual properties. This article is for general information only.