There's a growing divide within the private rented sector, with fewer locations still delivering the returns landlords need as tax pressures intensify, research reveals.
Dwelly examined Government house price data alongside the most recent ONS rental figures to pinpoint where average yields are currently strongest.
They've also been tracking which areas have improved most since last Christmas.
The findings come after the Autumn Budget saw tax rates on property income, savings and dividends rising by 2 percentage points.
Another tax rise for landlords
The firm's head of M&A, Sam Humphreys, said: "With the Budget confirming yet another tax increase for landlords, identifying markets that offer strong or improving yields is essential, as even small percentage changes to property income tax and dividends can significantly impact overall portfolio performance.
"Our analysis shows that despite rising pressures, there are still many parts of the country delivering exceptional returns, and others where yields have strengthened markedly over the past year."
He added: "For landlords facing a higher tax environment, these areas offer valuable opportunities to help maintain margins as operating costs continue to rise."
Smaller landlords will be strained
For landlords operating outside company structures, the higher levy on rental income is set to cut net returns further.
That's at a time when compliance costs and regulatory rules are increasing.
For incorporated landlords, the rises in savings and dividend taxation are expected to weigh on overall portfolio performance.
Dwelly, a letting agency acquisition platform , is now warning that smaller landlords are likely to feel the financial strain most acutely.
And that is also raising the prospect of further landlord exits from the sector unless income can be protected by investing in areas delivering higher returns.
Rental yield steadies at 6%
Dwelly says that across Great Britain, the average rental yield has held steady at 6% over the past year, as rent growth has matched gradual house price increases.
Beneath that headline figure, however, performance varies sharply by location.
The highest yielding areas remain concentrated in Scotland, Wales and parts of the North.
West Dunbartonshire tops the table at 9.1%, followed by Greater Glasgow on 7.8% and Renfrewshire and Inverclyde at 7.0%.
Merthyr Tydfil and Newcastle upon Tyne both deliver average returns of 6.6%, with Portsmouth close behind on 6.5%.
North Lanarkshire records 6.4%, while Dundee and Angus and Southampton each post 6.3%.
Manchester completes the top group with a yield of 6.2%.
Rising landlord yields
The research also highlights where yields have strengthened most over the past 12 months with Merthyr Tydfil seeing the biggest rise at 0.94%.
Westminster follows with a 0.54% improvement, ahead of Rhondda Cynon Taf at 0.51%, Tower Hamlets at 0.49% and West Dunbartonshire at 0.47%.
Further notable gains were recorded in Barking and Dagenham at 0.45%, Lambeth at 0.44% and Rutland at 0.43%.
The table for rising landlord yields also sees Redcar and Cleveland at 0.43% and King's Lynn and West Norfolk at 0.42%.
Student landlords need yield
The managing director of Accommodation for Landlords, Simon Thompson, said: "For student landlords, the message is becoming harder to ignore.
"Returns are no longer just about demand, but about geography, tax exposure and how resilient a local market is when costs rise."
He added: "Higher taxes mean a good location is no longer enough. The yield must work from day one.
"Cities with strong universities and constrained supply are still outperforming, which is why northern cities and parts of Scotland continue to stand out."
