Despite the recent tax crackdown, buy-to-let continues to look an attractive income investment at a time of low interest rates and volatile stock markets, but where in the country can the best yields be achieved?

Property peer-to-peer lender Kuflink has examined the average rental yield in 50 major towns and cities across the UK and found that properties in Manchester and Salford lead the way, providing average rental yields of 6.7% and 6.6% respectively, while Hull, Luton and Rotherham were among the areas that experienced the biggest increase in average rental yield over Q4 2016.

Despite the high rents achievable in southern England, especially in London, yields in the north are typically higher, reflecting the fact that properties cost significantly more in the south, meaning that buy-to-let landlords are left with relatively low returns.

The historic city of Cambridge – a popular commuter hotspot – provides the lowest average rental yield, just 2.7%.

The research also revealed that there are now less than 41,000 homes under £250,000 available in the UK, down from 58,000 available in October – a drop of 29%.

In London, somewhat worrying for first-time buyers and some buy-to-let investors, there are now fewer than 2,000 properties under £250,000 on the market as prices continue to soar.

Birmingham saw the biggest drop in properties available for under £250,000, with a decrease of 1,373 between October and December 2016, followed by Bristol, with a decrease of 1,017 properties.

Tarlochan Garcha, CEO at Kuflink, commented: “The rift between north and south continues, but this time the attention is turning north. Buy-to-let properties in the North can be a steady investment, attracting renters who cannot afford to step onto the property ladder and therefore choose to rent in good locations, which are well-suited to their lifestyle.

“Manchester and Leeds are both bustling cities, popular with young professionals and families, and can offer solid returns for landlords. While Birmingham, which has a growing business district and is soon to benefit from HS2, cutting journey time to London to just 49 minutes, is also firmly on the map as a strong buy-to-let spot.

“It could be time for landlords to turn their attention away from pricey London and look to the UK’s regional cities.”

The below table shows the ten towns and cities that provide the highest average rental yields:

The below table shows the ten towns and cities that provide the lowest average rental yields:

The below table shows the ten towns and cities that experienced the biggest increase in average rental yield: