According to property search engine home.co.uk, the biggest real yields, defined as rent plus capital appreciation of the underlying asset, are situated in the Capital.

Top 10 Property Investment Locations – based on Real Rental Yields for 2-bed properties

Source: Home.co.uk

Doug Shephard, director at Home.co.uk, commented:

“Most landlords appreciate that gross rental yields do not take account of the costs of maintaining, letting and insuring a property, yet many fail to consider the rise and fall of capital values in this equation.

“Whilst we would expect the key rental hot spots to typically mirror economic activity across the country, the big revelation in this new research is that the highest real yields are all in London. Despite the initial high capital costs, the combination of accumulating capital value and reasonable gross yields can make these areas look very attractive to potential investors.

“It’s also important to note that these top-performing areas are all in central London, a specialised sub-market of the wider UK property market and one where many of its residents have survived the recession well. The people who reside in such areas have maintained their employment status and continue to enjoy a successful career path. Key demand drivers are equally about easy access to work and social networks. Shoreditch is a perfect example and the consistent high demand for such properties has kept both sales and rental prices on an upward trajectory.

“Given our new take on yields, at the other end of the scale there are areas of the UK where landlords are losing money just by owning the property, even if their properties not subject to void periods and attract healthy gross yields.”

The real yield for Margate, for example, is a nightmarish -9.8% despite a gross rental yield of 5.1%.