City holiday homes offer better yields than rural or coastal areas

While people associate staycations with a trip to the countryside or seaside, better rental yields for those looking to invest in a holiday let can be found via holiday homes for city breaks.

Cities typically offer annual rental yields of 4.6%, compared to 3.5% in the country and 3.3% at the seaside, according to the latest research by Hoo, the hotel room offer platform.

They are cheaper too, with a typical price of £189,938, compared to £243,505 in the countryside and £248,359 by the sea.

Hoo analysed 60 major UK destinations located across the country, the coastline and major urban hubs, looking at the cost of renting, the cost of buying and what return is available for those considering a holiday let investment.

The best cities for investors

Of course, it depends on where you invest.

The best city rental yields can be found in Glasgow (7.2%), Belfast (6.2%) and Newcastle (5.6%), and average house prices in the areas are relatively affordable, at £149,565, £140,750 and £167,246 respectively.

At the other end of the spectrum, Leicester offers the worst rental yields (3.7%) of the cities analysed, followed by Cardiff (3.9%) and London (4.0%).

In the capital prices average at £496,006, making it a tough place for investors to buy without deep pockets. Bristol and Edinburgh are the second and third most expensive cities, at £311,829 and £288,899, offering yields of 4.2% and 4.6% apiece.

The countryside

While rental yields are typically lower in the countryside, the best can be found in Bangor, Wales (4.7%).

In Scotland, Dumfries leads the way on yields (4.1%), while Bury St Edmunds in Suffolk (4.1%) is a competitive area for those looking to invest in an English countryside holiday let.

The worst area analysed based on yield is Builth Wells in Wales, with a return of just 2.6%. Tetbury in the Cotswolds also offers a meagre yield of 2.8%, followed by Market Harborough at 3.0%.

Seaside locations

With homes by the sea, yields vary less than in the cities and countryside, as returns stand between 3.9% and 2.7%.

The best three areas are Tynemouth in Northumberland, Brighton in East Sussex and Crosby in Merseyside, all offering a 3.9% return. However, Brighton has far higher house prices than the other two, at £389,855 compared to £175,589 in Tynemouth and £182,316 in Crosby.

The worst seaside areas for holiday let investors are Salcombe in Devon and Southwold in East Suffolk, offering an average yield of just 2.7%

Hoo Co-founder, Adrian Murdock, commented:

“Due to the current situation, Brits are still looking for a break closer to home this year, meaning there should be strong demand for holiday homes as the weather improves and the holiday season approaches.

Cities tend to be more profitable on average, though our research highlights that there are plenty of valuable areas for investors in the countryside, and to a lesser extent that’s also true at the seaside.

Of course, for many, a holiday let serves a dual purpose and so a city-based investment probably won’t carry that much appeal. The good news is, that whether you’re keen on the city, country or coast, there are plenty of options at all budgets that provide healthy returns.”

Location	Average House Price - Dec 2020	Average Monthly Rent - 2021	Rental yield
City	£189,938	£731	4.6%
Seaside	£248,359	£683	3.3%
Country	£243,505	£711	3.5%
United Kingdom Overall	£251,500	£984	4.7%

Location	Type	Cost to Buy	Cost to Rent	Rental yield
Glasgow	City	£149,565	£901	7.2%
Belfast	City	£140,750	£730	6.2%
Newcastle	City	£167,246	£786	5.6%
Manchester	City	£200,514	£846	5.1%
Sunderland	City	£125,718	£523	5.0%
Nottingham	City	£162,962	£646	4.8%
Bangor	Country	£165,939	£653	4.7%
Leeds	City	£209,892	£818	4.7%
Doncaster	City	£142,313	£543	4.6%
Edinburgh	City	£288,899	£1,100	4.6%
Birmingham	City	£201,308	£748	4.5%
Liverpool	City	£148,324	£544	4.4%
Coventry	City	£197,253	£717	4.4%
Bradford	City	£154,899	£553	4.3%
Bristol	City	£311,829	£1,102	4.2%
Dumfries	Country	£140,264	£493	4.2%
Sheffield	City	£183,090	£641	4.2%
Wigan	City	£150,452	£518	4.1%
Bury St Edmunds	Country	£275,123	£942	4.1%
Wakefield	City	£167,497	£573	4.1%
London	City	£496,066	£1,639	4.0%
Cardiff	City	£227,553	£746	3.9%
Tynemouth	Seaside	£175,589	£571	3.9%
Brighton	Seaside	£389,866	£1,260	3.9%
Alnwick	Country	£167,879	£540	3.9%
Morpeth	Country	£167,879	£540	3.9%
Crosby	Seaside	£182,316	£585	3.9%
Denbigh	Country	£167,575	£528	3.8%
Stamford	Country	£227,641	£717	3.8%
Hastings	Seaside	£220,643	£691	3.8%
Leicester	City	£201,956	£630	3.7%
Keswick	Country	£167,388	£520	3.7%
Nantwich	Country	£256,160	£775	3.6%
Whitby	Seaside	£181,037	£540	3.6%
Lewes	Country	£335,635	£992	3.5%
Torquay	Seaside	£210,160	£620	3.5%
Knaresborough	Country	£294,690	£854	3.5%
Harrogate	Country	£294,690	£854	3.5%
Porthmadog	Seaside	£174,834	£507	3.5%
Southend	Seaside	£327,190	£944	3.5%
Bournemouth	Seaside	£297,143	£850	3.4%
Worthing	Seaside	£324,877	£929	3.4%
Wilton	Country	£298,659	£823	3.3%
Ludlow	Country	£231,851	£638	3.3%
Margate	Seaside	£260,768	£713	3.3%
Cranbrook	Country	£406,258	£1,109	3.3%
Skegness	Seaside	£198,353	£538	3.3%
St Ives	Seaside	£262,939	£707	3.2%
Weymouth	Seaside	£309,427	£811	3.1%
Wareham	Country	£309,427	£811	3.1%
Chagford	Country	£264,173	£685	3.1%
Market Harborough	Country	£313,711	£796	3.0%
Aberystwyth	Seaside	£199,562	£506	3.0%
Tenby	Seaside	£198,344	£489	3.0%
Whitstable	Seaside	£325,890	£803	3.0%
Woolacombe	Seaside	£270,371	£629	2.8%
Tetbury	Country	£418,812	£972	2.8%
Southwold	Seaside	£266,910	£607	2.7%
Salcomb	Seaside	£351,765	£785	2.7%
Builth Wells	Country	£206,656	£440	2.6%