5 UK Cities Where HMO Yields Still Beat 10% in 2026

Why London Is Losing the Yield Argument in 2026

I'll be direct: London is a capital appreciation play, not a yield play. It's always been that way for most landlords, but the gap has widened considerably in 2026.

According to the HMO Mortgage Broker 2026 Market Report, London HMO yields have softened as purchase prices remain stubbornly elevated. Meanwhile, HMOChecker Q1 2026 data shows average HMO yields nationally have compressed from 10.4% to somewhere between 9.6% and 10% — largely driven by higher operational costs including licensing compliance, maintenance, and management fees. That compression is being felt hardest in markets where entry prices are already high.

Compare that to a standard buy-to-let sitting at 5-6% gross nationally, and even a compressed HMO yield in the North still looks exceptional. But 'compressed' doesn't mean broken. It means you need to be more selective about where you buy.

And Zoopla's March 2026 data is the real kicker: rental supply is still 23% below pre-pandemic levels. Demand isn't going anywhere. The cities that combine affordable entry prices with that structural supply shortage are the ones printing the strongest yields right now.

City 1 & 2: Liverpool and Manchester — Still the Benchmark

These two dominate every serious HMO yield conversation, and for good reason. The HMO Mortgage Broker 2026 Market Report names Liverpool and Manchester as leading the country on gross HMO yields — driven by young professional demand and a genuine shortage of licensed HMO stock relative to that demand.

Liverpool, specifically, has entry-level HMO purchase prices that still allow investors to model credible 10%+ gross yields on a 5-6 bedroom property in areas like Kensington, Wavertree, and Toxteth. The student and young professional population in L3, L6, and L7 postcodes creates consistent, low-void tenancy cycles.

Manchester is slightly tighter on purchase price — Salford and Stretford still offer better entry points than M1 or M14 — but the demand fundamentals are arguably stronger. MediaCityUK keeps pulling in young professionals, and the city's continued infrastructure investment means capital values are also moving in the right direction.

One trade-off worth naming: both cities have seen an uptick in Article 4 Direction coverage, which means converting a standard property into an HMO in certain areas now requires planning permission. That's not a reason to avoid them — it's a reason to buy properties that are already licensed and operating, or to work with someone who understands the local planning picture. Consider consulting a qualified solicitor before committing to any conversion strategy in these areas.

City 3: South Yorkshire — The 2026 Dark Horse

If I were starting fresh with £150,000 to deploy right now, South Yorkshire would be on my shortlist before Manchester.

Foot Forward Properties flagged South Yorkshire as their 2026 frontrunner, citing consistent 7% annual capital appreciation alongside strong gross yields. Sheffield specifically has a dual demand engine — two major universities (University of Sheffield and Sheffield Hallam) plus a growing professional population drawn by lower living costs relative to Manchester and Leeds.

Rotherham and Barnsley, sitting just outside Sheffield, offer even more aggressive entry prices. A 6-bed HMO in Rotherham that would cost you £180,000-£220,000 might cost £320,000+ in comparable Manchester postcodes. The yield arithmetic is straightforward once you run the numbers.

The regeneration story matters too. South Yorkshire's investment in transport and commercial infrastructure over the past five years has been consistent — not flashy, but consistent. That's actually what you want as a buy-and-hold investor. Flashy regeneration announcements spike prices before the infrastructure arrives. Steady regeneration compounds quietly.

Be honest about the trade-off, though: capital appreciation upside in Rotherham isn't the same as in Sheffield city centre, and tenant quality can be more variable in certain postcodes. Do your due diligence on Article 4 coverage in Sheffield specifically — it's expanding.

Cities 4 & 5: Nottingham and Coventry — Midlands Yields That Deserve More Attention

The Midlands doesn't get enough credit in HMO yield conversations. Everyone talks about the North, and I understand why — the numbers are compelling. But Nottingham and Coventry are quietly running comparable gross yields with some structural advantages the Northern cities don't have.

Nottingham has one of the highest concentrations of student HMO demand in the country relative to its size. The University of Nottingham and Nottingham Trent together generate enormous, reliable tenant demand. The flip side: Nottingham City Council has one of the most active selective licensing and Article 4 regimes in England. That's a compliance burden — but it also suppresses competition from inexperienced landlords who can't navigate the licensing requirements. If you know what you're doing, that's actually a mild moat.

Coventry is the one that surprises people. Post-City of Culture 2021, the city attracted sustained regeneration investment and a noticeable uptick in young professional migration. The University of Warwick's proximity drives student demand, and entry prices in CV1-CV6 postcodes remain realistic for investors who've been priced out of Birmingham. The HMO Mortgage Broker 2026 Market Report highlights the broader Midlands region as among the strongest for gross HMO yields nationally — Coventry sits squarely in that picture.

One practical note: both cities have specific licensing requirements that differ from national minimums. Budget for compliance costs before you model your yield — I've seen investors get stung by underestimating this on their first Midlands HMO.

How to Actually Find HMO Opportunities in These Cities

Here's where most investors hit a wall. Knowing which cities to target is step one. Finding the actual available HMOs — licensed, operating, priced correctly — is a different challenge entirely.

Rightmove and Zoopla list some HMOs, but their coverage is patchy. A lot of HMO stock changes hands off-market or through specialist channels. And filtering by city, room count, licensing status, and yield isn't something the major portals were built to do.

That's the gap [ZARSK](https://zarsk.co.uk/) is built to fill. The database is — as far as I'm aware — the largest dedicated HMO database in the UK, constantly updated, and built specifically for investors who want to search by location, filter by property characteristics, and identify opportunities across exactly the kind of markets I've described above. If you're serious about Liverpool, Sheffield, Nottingham, or Coventry, searching there is a materially better starting point than the generic portals.

And once you've found your target property, the other major hurdle is finance. HMO mortgages are genuinely more complex than standard buy-to-let — lenders assess them differently, stress-test them differently, and the product range is narrower. Freeing up equity from an existing portfolio to fund a new acquisition is even harder. ZARSK's regulated finance partners at [zarsk.co.uk/finance-property](https://www.zarsk.co.uk/finance-property) have been doing this for over a decade and understand HMO lending in a way that a high-street mortgage broker simply doesn't. If you're stuck on the finance side — whether that's a first HMO mortgage or unlocking equity from properties you already own — that's worth a conversation.

Yield compression is real. But it's not uniform. The investors who will look back at 2026 as a missed opportunity are the ones who read the national average — 9.6% to 10% per HMOChecker Q1 2026 — and concluded the market had peaked. The ones who'll look back at it as a defining year are the ones who went city by city, postcode by postcode, and found the pockets where supply is still constrained, demand is still structural, and entry prices still allow the numbers to work.

Liverpool, Manchester, Sheffield, Nottingham, Coventry. These aren't tips. They're the output of reading the available data and following it where it leads. The question isn't whether the yields are there. They are. The question is whether you're going to act on that before the next wave of investors figures it out.