Landlords in the North East are enjoying an impressive average rental yield of 8.13%, positioning the region at the top of Paragon Bank’s latest rental yield rankings. This high level of return on investment highlights the North East as a hotspot for landlords seeking strong profits.

Wales closely follows, with landlords there achieving average returns of 8.07%, making it a competitive second place in the study. Meanwhile, the North West secures the third position, with buy-to-let (BTL) properties in the region yielding a solid 7.84% return.

Yorkshire & Humber also performs well, surpassing the overall average yield across England, Scotland, and Wales, which sits at 7.17%. In this region, landlords are seeing yields of 7.54%, adding another Northern region to the top-performing areas.

Further supporting the attractiveness of these regions for landlords, the Office for National Statistics (ONS) released its 2023 ‘Housing affordability in England and Wales’ report, which shines a light on where housing costs are most manageable. The North East, North West, and Yorkshire & Humber emerged as the most affordable areas. Affordability was calculated by comparing house prices to the gross annual earnings of workers in those regions.

In 2023, the data shows that homes in England were selling for 8.3 times the annual salary of a full-time worker, while in Wales, the figure was 6.1 times. However, across the Northern regions, only four local authorities reported affordability ratios above eight. This reflects a stark contrast to the North East, which stood out as the most affordable overall, with a significant number of local authorities having affordability ratios below five.

On the opposite end of the spectrum, London remains the least affordable region in the UK, where a staggering eight out of ten local authorities have affordability ratios exceeding 12.

Louisa Sedgwick, managing director of mortgages at Paragon Bank, commented: “Our latest report draws on industry data to reveal that, during the last decade, the North of England has surpassed the south in terms of the proportion of buy-to-let home purchases.

"I think one of the reasons why the region has increasingly gained the attention of landlords is the opportunity to generate strong returns on investment.

“Demand for rented homes is high in the north, as it is across the UK, and with property that can be significantly more affordable to buy compared to southern regions, landlords are able to respond, confident that they will be able to achieve above average yields.”

With the combination of high rental yields and strong affordability, the North of England continues to cement itself as a lucrative market for property investors looking to maximize returns while managing costs effectively. The disparity between the north and south offers landlords a compelling reason to focus their investments in these high-yield regions.