Peer-to-peer lender Lendinvest, using data from Zoopla and the Land Registry, says Manchester, Liverpool, Cardiff, Coventry and Oldham produce the highest rental yields, followed by Sunderland, Blackburn and Durham.
While capital growth is of course highest in London and the Home Counties, central London comes only 18th in the country when it comes to rental yields.
The lender’s league table also shows that rental yields are no indication of average house price - only one of the 15 best locations for yields, outer London, features in the top 15 locations for capital growth.
“Next year, we could see some weakening in London’s dominance of capital gains tables if house price growth does soften slightly as forecast, and as new stamp duty hikes take effect” says Christian Faes, chief executive of LendInvest.
“Landlords whose tax payments under the new regime make letting their properties unsustainable, may make arrangements to leave the market. In turn, we will see fewer highly geared rental properties that push up prices and take stock out of the housing supply for aspiring owner-occupiers and first-time buyers drawn to densely populated urban area for work” he says.
Faes forecasts that 2016 could be the year of the “cross-country landlords” - professional landlords who live in one city but let out elsewhere in the UK.
“We could expect to see more landlords letting property in the North and Midland’s major urban areas for more immediate upside, without moving from their family homes in which gains can be longer to materialise.”