Manchester has emerged as the most lucrative city in the UK for buy-to-let landlords, outpacing London on rental yields despite having significantly lower average rents, according to new research by Helix Law.
The specialist property litigation firm revealed that average rental yields in Manchester now stand at 4.21%, compared to just 2.25% in London, which ranks fifth on the list. While the capital continues to command the UK’s highest rents, sky-high property prices have dragged down average returns.
“Manchester is a good example of why landlords and seasoned property investors look beyond headline property prices,” said Alex Cook, a commercial and property litigation solicitor at Helix Law. “Lower entry costs don’t necessarily mean lower returns – they can often deliver better yields when rental demand remains strong.”
Average property prices in Manchester hover around £247,000 – significantly more affordable than London, where the average home costs £673,653. Edinburgh also ranked higher than London, with an average property value of £288,000 and more attractive yield potential.
The findings highlight a growing trend of landlords looking outside the capital to maximise investment returns, particularly in cities like Manchester, where rental demand remains buoyant amid population growth and urban regeneration projects.
The shift comes at a time when landlords across the UK are facing increasing financial pressures and shrinking margins. According to lettings and property management firm Hello Neighbour, landlords in London alone are being charged over £2 billion annually in what the company describes as “excessive” letting agent fees. These include exit penalties and management charges that can account for up to 20% of annual rent.
In addition, the erosion of tax-deductible mortgage interest and a tightening web of regulation have left many landlords reassessing their portfolios. This is especially true in London, where yields have continued to slide despite strong rental prices.
“Landlords are being squeezed at both ends,” said a spokesperson for Hello Neighbour. “Not only are they dealing with reduced tax relief and compliance burdens, but they’re also locked into costly contracts with letting agents, which is eating into their returns.”
The upcoming Renters’ Rights Bill, which is expected to become law next year, could place further strain on the sector. While the bill aims to strengthen protections for tenants—such as banning no-fault evictions and granting more flexibility over pet ownership—landlord groups have raised concerns about the potential for increased costs and reduced control.
Angela Rayner, the Housing Secretary, has faced mounting pressure to include landlord-focused reforms in the final legislation to prevent an exodus of investors from the private rental market.
Meanwhile, the latest House Price Index from Zoopla noted that taxation and policy changes aimed at second homeowners and landlords were driving down demand and leading to a rise in property sales among this group—further impacting local house price growth.
As a result, more landlords may increasingly look to northern cities like Manchester to secure stronger long-term returns and avoid the cost burdens of operating in London.
