A new study has shown that the North is far more profitable for landlords, thanks to high and rising house prices in the South, with Stoke-on-Trent rated top.

The study, published by Property Partner, ranked 100 areas of the country by profitability for landlords – based on property prices, average rental income, and average salaries.

The most profitable areas are the ones with the highest annual rental yield compared to the area’s affordability rating (average house price divided by the average earnings).

The five areas with the highest annual rental yield – Leeds (6.92 per cent), Gateshead (5.78 per cent), Stoke-on-Trent (5.67 per cent), Rochdale (5.6 per cent) and Newcastle (5.59 per cent) were all in the top ten for overall efficiency/profitability.

Property Partner founder Dan Gandesha explained: “What our research reveals is a clear North-South divide in the investment opportunities facing buy-to-let landlords.

“We have always been at pains to point out to investors that prime locations such as Kensington and Chelsea can offer some of the lowest yields available, because prices have raced ahead while rents have failed to keep pace.

“It just goes to show, you shouldn’t always follow the crowd and the right investment could be on your doorstep where there is far less overall demand.”

The least efficient areas to invest in rental properties according to the study are Poole, Central London and Sevenoaks.

These were also among the worst for annual rental yield, with Poole (annual rental yield of 1.94 per cent) at the bottom of both tables.

Stoke-on-Trent has an average property price of £117,586 and an average annual income of £26,250 – giving it an affordability index of 4.48.

With the average annual rent at £6,672, the annual rental yield is 5.67 per cent. Annual rental yield divided by affordability of the property gives the final yield at 1.27 per cent – the highest of any of the 100 regions scored.

Head of Operations at Simple Landlords Insurance, Alex Huntley, added: "Quite clearly, things are not grim up North for landlords - and there are still opportunities out there for those looking to expand. Investing further afield, though, brings its own issues.

"If you're not living nearby your rental property, you're not there to deal with issues on the ground, conduct inspections or respond to tenant issues in person - and you don't have local engineer or contractor relationships to get things fixed fast. There's more to go wrong, and that's where you insurance can help you out - particularly products like Home emergency cover and Key protection.

"If you choose to go through a local agent, run your numbers carefully - you don't want agent fees to wipe out the profit you're making by heading up the country."