What type of property brings the best returns for investors?

19 June 2020 | Investment

One-bed properties are now proving to be the best investment when it comes to buy-to-let rental yields across the UK’s major cities.

That’s according to the latest research from lettings management platform Howsy. The firm’s previous study revealed that three was the magic number for rental yields, offering the highest return with a rental yield of 4.3%.

While this has since increased to 5% now, the latest figures reveal that three-beds are no longer the best investment option.

Both two and one-bed properties, in fact, have leapfrogged the three-bed home where rental yields are concerned. The average two-bed currently provides a yield of 5.6%, while one-beds now average a return of 6.2%.

According to the findings, Newcastle is the safest bet when it comes to investing in a one-bed buy-to-let, with the average yield landing at 7.9%.

This is closely followed by Glasgow (7.7%), Liverpool (7.1%) and Plymouth (7%), which are all home to yields of 7% or higher.

Newcastle and Glasgow also rank along with the Northern Irish capital Belfast (6.9%) as the best places for a two-bed buy-to-let investment, with Sheffield (6.7%) and Leeds (6.4%) also proving profitable. 

Those who want to stick with the trusted three-bed are best off north of the border, with Glasgow topping the table thanks to average returns of 6.9%. Newcastle, Belfast, Leeds and Liverpool all score well again on this front, too.

Calum Brannan, the founder and chief executive of Howsy, said: “We’re seeing a lot of changes to traditional property trends across the sector and the latest seems to be the profitability of the three-bed buy-to-let. While still a good investment, on the whole, tenant demand is growing for one and two-bed homes that provide them with a space of their own.”

This growing demand, he added, is leading to one and two-bed properties climbing the ranks of profitability due to ‘their lower investment price point and higher demand pushing up rental prices’.

“As the threat of the coronavirus reduces, we will no doubt see this trend reverse as people begin to again feel comfortable about shared living and the better social lifestyle this brings.”

This post has originally been featured in Property Investor Today.