Southampton tops the list of buy-to-let property hotspots with a rental yield of 7.82%, says HSBC.
It looked at 50 towns and cities with high concentrations of private rental housing stock, and found that Southampton scored best for yield due to relatively affordable housing and an average rent of £901 per month.
The relatively inexpensive property prices in Blackpool, Hull, Manchester and Nottingham mean that these four northern areas make up the rest of the top five, offering strong returns for investors with yields of 7.81%, 7.77%, 7.60% and 7.55% respectively.
In sixth place, Coventry is the only other city offering returns of over 7% with a yield of 7.13%.
Despite the high proportion of private rentals in the capital, London does not score highly in terms of rental yields, due to high property prices.
The top-performing borough in the capital, Southwark, is 13th overall, while the affluent London boroughs of Hammersmith & Fulham and Kensington & Chelsea are ranked in the bottom two places in the top 50, generating returns of just 3.42% and 3.34% respectively. Most surprisingly is the omission of some places altogether from the list – for example, Leeds and Birmingham.
Due to holiday rentals and seasonal work, many seaside towns are BTL hotspots, with 17 of the top 50 areas on the coast.
Blackpool tops the seaside town list with a yield of 7.81%. The rest of the top ten is made up of southern seaside areas such as Brighton, Bournemouth and Eastbourne. While property prices tend to be higher in these areas, rents are also above average, meaning yields are strong for investors.
All yields quoted are gross.