Best Cities For High Rental Property Yields in 2016

Property

Best Cities For High Rental Property Yields in 2016

Are you on the lookout for a buy-to-let property? These cities are a good bet for those looking for good rental income.

Published on 30 November 2016

Property remains one of the most robust investment classes, especially in the long-term. While some invest for capital appreciation, others look to rental from real estate as a form of passive income. These cities and towns performed especially well this year in terms of rental yields, so if you are considering investing in residential property for rental in 2017, they are an excellent place to start your search.

Grand Rapids, Michigan & Pittsburgh, Pennsylvania, US

Above 15%

Global real estate advisors Savills named the US one of the top property markets for 2016. The US economy has shown a strong recovery from the global financial crisis of 2009, and buyers have snapping up apartments and houses in trendy cities where demand is high and supply is limited, like San Francisco and Los Angeles.

But for the best rental returns, RentRange, a housing market data analytics firm found that Grand Rapids in Michigan and Pittsburgh in Pennsylvania had average gross yields over 15%. Syracuse in New York was also strong for rental yields. These gains were measured between the second quarters of 2015 and 2016.

Amsterdam, Netherlands

6.6%

According to an article by Olivia Rudgard in The Telegraph in May, the Netherlands generally boasts the highest rental yields compared to other cities in the European Union. While average prices of homes tend to be low – about £110,000 for a one-bedroom apartment and £211,000 for a three-bedroom house – investors can expect an average rental yield of 6.6 % per annum.

Montreal, Canada

5.4 – 7%

Toronto and Vancouver have long been popular cities for residential property investors, but a report published in the Global Property Guide in March revealed that Montreal is the newest hot city to watch. Montreal yields 5.4% to 7% while Toronto yields from 4.4% to 5%. If you own a small apartment of 60 sq m in Montreal and rent it out, you are likely to make a return of around 7% per annum, according to the report. In this low-return era, in a low-risk country such as Canada, that is certainly an acceptable, not to say enticing, yield. Even on a largish 120 sq m apartment in Montreal, you are likely to earn a gross rental return of 5.4%.

Manchester and Liverpool, UK

6.02% & 5.16%

London might be a popular city for property investors, but the cities of Manchester and Liverpool are delivering the highest average rental yields in 2016, at 6.02 % and 5.16 % respectively, according to an article in March by Bonnie Dellow on the Simply Business website.

Improved infrastructure, population growth and increasing residential property prices are just a few reasons behind these cities’ thriving rental property markets.   

Canberra, Australia

5.2%

The country remains one of the best choices for property investors, but if you are focused on rental returns you would be wise to look beyond the major cities of Sydney and Melbourne.

In her January, 2016 article in The Canberra Times, Katie Burgess writes that rental yields in the political capital of Canberra have been – and will continue to be – strong, with return on units approximately 5.2% at the start of 2016, up 0.2% from the previous 12 months. According to Residential Development Council executive director Nick Proud, “demand from the public service is quite unique compared to other capitals in Australia so you’ll always see that vibrant residential rental market and that in turn will bring those that are landlords into the market to invest.”

Hobart, in the state of Tasmania, and Darwin in the Northern Territory are two other Australian cities that are also fast growing and therefore worth investing in.  

Tokyo, Japan

3.4 – 5.4%

Continuing economic growth, and an infrastructure investment boom in the lead-up to the 2020 Summer Olympic Games are just two factors that are believed to be driving up rents in this Asian country.

According to a November article on Property Guru, research conducted by the Global Property Guide in April found that gross rental yields in Tokyo ranged from 3.4 to 5.4%.

Figures from the Japan Real Estate Institute also showed that rents were rising modestly. In 2015, for instance, the nationwide apartment rent index rose by 2.7% from the year before – in Tokyo, apartment rents increased 5.2% year-on-year in 2015, while in Osaka, apartment rents rose by 1.4% year-on-year over the same period.

Summary

Grand Rapids, Michigan & Pittsburgh, Pennsylvania, US – Above 15%
Amsterdam, Netherlands – 6.6%
Montreal, Canada – 5.4 – 7%
Manchester and Liverpool, UK – 6.02% & 5.16%
Canberra, Australia – 5.2%
Tokyo, Japan – 3.4 – 5.4%

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