Properties in Burnley in Lancashire offer the best returns for landlords, with rental yields of 7.1%, according to Direct Line for Business.

With average house price values in the town at £76,300 and annual rents of £5,388, landlords in the area benefit from a better return on their property investment than other parts of the UK.

Glasgow City in Scotland comes in second with yields of 6.9% and Belfast in Northern Ireland is third at 6.4%.

On a regional level, Northern Ireland offers landlords the best yield, with an annualised return of 5.6%, followed by Scotland (5.3%) and the North East (5%).

Poor returns

Rental markets in London, the South East and the East of England offer the poorest yields, because of the high cost of purchasing a property in these locations.

Rental yields in London, where the average house price exceeded £480,000 in 2017, stand at just 4.4%, despite average annual rents costing more than £20,000.

Likewise, yields in the South East, where properties cost an average of £322,000, is relatively low at 3.7%, while in the East of England (average property price of £289,000 in 2017) the annualised yield stands at 3.5%, the lowest in the UK.

Christina Dimitrov, business manager at Direct Line for Business, said: “As the number of renters across the UK increases, so too has the number of private landlords, with more than five million privately-let properties currently in the UK. With this increased competition, it is more important than ever that landlords are able to offer their tenants well maintained and fully insured properties that will provide best return on their investment in the future.”