North-South Rent Gap Narrows in the UK: What It Means for Property Investors

For years, the UK property market has been marked by a distinct disparity in rental prices between the North and South. However, recent data reveals that the North-South rent gap is narrowing, presenting new opportunities for property investors across the country.

According to the latest figures from Property Industry Eye, rents in the North have surged, narrowing the gap with the South, where rents have traditionally been higher. The South still commands the highest prices, but the North is catching up, with many cities seeing remarkable rental growth. This shift could benefit property investors, particularly those targeting high-yield investments in the North.

Rising Rents in the North

In recent months, rents in the North of England have risen at a rapid pace. For instance, the average monthly rent in Manchester has increased by 9% over the past year, reaching approximately £1,127, while in Liverpool, rents have risen by 8%, now averaging around £1,029 per month. Leeds, another northern hotspot, has seen rents rise by 7%, with average rental prices now at £1,041 per month. These figures represent a significant increase in rental demand, particularly in key city-centre locations, driven by a younger workforce and growing job opportunities.

In contrast, London has seen relatively modest rental growth, with a year-on-year increase of just 2%, bringing the average rent in the capital to £2,192 per month. This slower growth, coupled with rising northern rents, means the North-South rent gap is closing, creating new opportunities for investors seeking high rental yields in more affordable areas.

Closing the Gap

While southern cities like London and Brighton still have the highest rental prices, the North is quickly catching up. The rent gap is narrowing at a noticeable pace. For example, in 2020, the average rent in London was nearly double that of Manchester. Today, that difference has shrunk significantly, with rents in northern cities rising faster than in the capital.

Take Liverpool as an example. In 2019, average rents were around £950 per month. Now, just a few years later, they’ve crossed the £1,000 mark, with demand continuing to push prices higher. In Manchester, the average rent in 2020 was £975, and today it stands at £1,127, an increase of 15% in just a few years.

Why This Matters for Investors

For property investors, the narrowing North-South rent gap presents exciting opportunities. Northern cities, such as Manchester, Liverpool, and Leeds, offer significantly better returns compared to many southern locations due to their combination of rising rents and lower property prices.

For example, in Manchester, with property prices averaging around £250,000 and rental yields hovering at 5.5% to 6.5%, the potential for high returns is considerable. In Liverpool, investors are seeing yields as high as 7% to 8% in some areas, making it one of the most attractive markets in the North. Meanwhile, Leeds offers yields of 6%, driven by its strong job market and growing student population.

Key Takeaways for Investors

• Higher Yields: Northern cities are now offering higher rental yields compared to southern cities. In some cases, yields in the North can be as high as 7%, compared to 3% to 4% in parts of London.
• Rising Rental Demand: Cities like Manchester, Liverpool, and Leeds are experiencing strong rental demand due to increasing populations, job opportunities, and a younger workforce.
• Long-Term Growth: Ongoing investment in infrastructure, such as the Northern Powerhouse initiative, and the continued popularity of northern cities for businesses and young professionals, are expected to further boost rental demand.

Conclusion

The rental landscape in the UK is changing, with rents in northern cities rising rapidly and narrowing the traditional North-South gap. This presents a golden opportunity for property investors looking to maximise their returns in the rental market. With rental yields of 6% to 7% and rising property values, northern cities are becoming the go-to choice for savvy investors.

Now is the time for investors to explore the potential of the North, where strong demand and rising rents offer the promise of impressive returns. As the North-South rent gap continues to narrow, northern cities are cementing their place as high-yield investment hotspots.