The TN28 area of Kent followed closely behind with a yield of 10.5% while the Merseyside postcode of L14 promised yields of 9.6% and the Surrey postcodes GU6 and RH4 offered 9.5% and 9.1% respectively.
Sean King, chief executive officer at Move with Us, said: “Landlords looking to maximise yield will need to look outside of central London. Commuter belts to the west and east of London are clearly yield hotspots as renters look to access the Capital’s work and social opportunities without the cost of renting a central London property.”
Large areas of Greater London currently return an average yield of less than 4% according to the research. This is at odds with strong house price growth widely reported in the Capital.
However infrastructure investment into the Stratford area has created a lasting legacy for landlords with three of the top five Greater London postcodes, E15, E13 and E6, clustered within sight of the Olympic area and returning yields of over 7%.
The study looked at two-bedroom properties for sale and for rent and identified that the highest yields are scattered widely across regions and mainly outside of Greater London.
The combination of lower capital costs and reasonable rental prices has delivered gross yields in the range of 8.7% to 10.6% in the top ten yielding postal districts.
Birmingham’s dominance in the top ten indicates that the second city’s rental sector presents significant opportunities.
Overall the pattern showed that the high yielding hotspots are mainly in more densely populated urban and suburban environments where housing demand is strong.
The highest yielding areas of Wales are to the north of Cardiff and return 7.5%.
At the other end of the spectrum rental property is only offering landlords a return in the region of 2% in the more isolated areas of England and Wales.
Countryside locations such as the Brecon Beacons, rural Devon, the Peak District, the Yorkshire Dales, Exmoor and Dartmoor are more sparsely populated and tend to attract homeowners rather than the young professionals who will pay a rent premium for living near to work and nightlife.
Doug Shephard, director at Home.co.uk, said: “This new study is a route map for investors in search of the highest potential rental yields.
“Landlords clearly need to be open-minded about where to invest and not simply look in their immediate area.”
He said a highly localised approach, identifying the ultimate combination of in-demand property types, lower capital investment and higher rental prices, will deliver good yields, fewer voids and maximise potential returns. But he added: “Whilst gross rental yields can be attractive it is important for investors to appreciate that changing capital values can radically alter the real investment potential.”
