Buy-to-let returns continued to outperform many major asset classes in the second half of last year, with landlords earning an average gross rental yield of 5.3% despite cooler housing market conditions.
Northern England, where rents stand at an average of £513 per month, offered the best annual returns, with landlords achieving a yield of 7% in H2 2016, according to data from BM Solutions.
Other strong areas were Northern Ireland at an average of 6.5% and the North West (6.4%).
London, in contrast, saw the lowest rental yields (4.4%), followed by the South East and the South West (both 4.9%).
At £1,591 per month, rents remained most expensive in Greater London, 45% higher than the South East (£1,095), which is the next highest region, and more than double the UK average.
Phil Rickards, head of BM Solutions, said: “Rental yields remain strong, still offering investors high real returns.
“Typically buy-to-let investors in northern areas tend to benefit from lower property values providing higher yields, whereas southern regions have the lowest yields given the higher housing costs.”
In the second half of 2016, the market slowed with buy-to-let transactions falling by 41% compared to the same period a year earlier, as tax changes and stamp duty rules inevitably left what Rickards described as “an imprint on the market”. But there still remains healthy appetite from people looking to invest in the buy-to-let sector.
He added: “Demand for rental properties remains high and returns have remained strong in the past six months despite the challenges that have faced the market during that time.”