This city shines as the UK's top BTL hotspot for 2026 - London misses out

Birmingham has emerged as a prime destination for UK landlords in 2026, outshining traditional powerhouses like London, according to a new analysis.

According to LandlordBuyer, the west Midlands city is gaining traction due to significant infrastructure projects, plus robust demand from students and young professionals.

It is expected to see a rent price surge of 3.5%.

2026 will be pivotal

The firm's managing director, Jason Harris-Cohen, believes 2026 will be a pivotal year for the UK's landlords.

He said: "Birmingham's rental market is poised for continued growth through 2025 and 2026, underpinned by strong demand, limited supply and ongoing urban development.

"For landlords and investors, the city presents an opportunity to achieve both attractive rental yields and capital appreciation."

He added: "As Birmingham continues to evolve, it solidifies its status as a leading destination for property investment in the UK."

BTL sector is undergoing change

The firm says that the UK's buy to let sector is navigating a transformative period.

Despite some landlords exiting due to rising interest rates and stricter regulations, savvy investors are finding opportunities in regional hubs.

Industry projections indicate BTL lending will climb to £42 billion in 2026, an 11% increase from 2025.

Average house prices are set to rise by 4% amid growing market optimism and declining inflation.

Also, rents are also forecast to grow by 3.5% next year, contributing to a 17.6% cumulative increase by 2029.

Opportunities in smaller cities

Smaller cities are stealing the spotlight for rental yields with research revealing that Blaenau Gwent leads with an impressive 11.4% yield.

It is followed by Redcar and Cleveland at 9.5%, and Derby and Newcastle offering 6–8%.

Birmingham, however, stands out for its blend of high yields and long-term growth potential.

The firm says there will be challenges next year such as new regulations, including the abolition of Section 21 'no-fault' evictions and stricter energy performance requirements.

Also, tougher rental rules from the Renters' Rights Bill are reshaping the market.

It is these reforms which may push out less-prepared landlords, creating space for more professionalised portfolios, it warns.

Landlords are still looking to expand

The research from LandlordBuyer coincides with Handelsbanken's fourth annual Property Investor Report.

It reveals that more than half of the UK's property investors are set to expand their portfolios in 2025, despite economic and geopolitical challenges.

The survey, targeting larger portfolio investors and property managers, shows 54% plan to grow their holdings, with 73% diversifying geographically and 75% across sectors.

Commercial property has eclipsed residential, with 46% anticipating strong demand growth compared to 17% for homes.

Also, London has reclaimed its status as the top investment region, cited by 46% of respondents, followed by the East of England at 42%.

Student-focused portfolios

Simon Thompson, the managing director of Accommodation for Landlords, said: "It should be no surprise that Birmingham stands out as a top investment hub since it has strong demand from students and young professionals.

"While it has promising rental growth of 3.5%, other regional cities like Derby and Newcastle also offer compelling yields, making them attractive for student-focused portfolios."

He added: "However, new regulations, including the end of Section 21 evictions and stricter energy standards, mean landlords must adapt to stay competitive.

"By targeting high-yield areas and upgrading properties to meet compliance, student landlords can capitalise on the evolving market."