This result marks a significant improvement from last year’s performance where Manchester finished fourth in the same table.
The research published by HSBC detailed that landlords could claim average annual rents of £8,316 and gross yields of 7.98% if they chose to invest in Manchester.
Manchester also claimed seventh place in a second table which ranked regions on their year-on-year rental growth, with the city experiencing annual growth of 5%.
Reading and Brighton posted the strongest performances in this respect, with rents growing year-on-year by 12.8% and 12.6% respectively.
However, in terms of rental returns Southampton came out on top, posting yields of 8.73%, while Nottingham finished in third place with potential yields of 7.67%.
The table also highlighted Liverpool’s emergence as a burgeoning investment capital, with the former European Capital of Culture finishing ninth delivering yields of 6.5% for investors.
Liverpool is also an attractive market for investors due to the low price point which properties can be purchased for, with average house prices standing at £91,175; the fourth lowest average price out of those within the top ten.
In fact, the research suggests that the gaze of investors is increasingly looking towards the North, with Blackpool and Hull being ranked as the 4th and 5th best performing regions in terms of rental yields.
Those investing in Blackpool can claim potential yields of 7.63%, while Hull is popular with investors, as properties can typically be purchased for just over £68,000, yet rents of more than £5,000 a year can be claimed.
The table found that the strongest performing markets normally had low price points and strong rental demand from young professionals and university students.
HSBC completed the report by considering a wide range of findings, including house prices recorded by the Land Registry.