Aldermore’s new Buy to Let City Tracker has studied 50 cities across the country to establish the top places for landlords to invest in.
The Tracker, which has been expanded from 25 cities in 2019 to 50 cities, found Manchester, closely followed by Cambridge, to be the best.
The results were determined by analysing and assessing five key indicators that impact desirability; average total rent, the best short-term returns through yield, long-term return through house price growth over the past decade, the lowest number of vacancies as a proportion of total housing stock, and percentage of the city population in the rental market.
Manchester’s rapid economic growth that was seen pre-Covid and the significant investment in commercial and residential developments over the past five years, has made it a desirable and affordable city to live in, the report said, with ‘good’ scores on four out of five metrics.
The city performs well on core factors such as rental returns and long-term house price growth, but significantly has one of the biggest rental markets in the UK, with 31% of Manchester’s population being private renters. It also has some of the lowest vacancy rates across any city included in the Tracker. This is combined with above average rental ability (on average £428 per room per month) and security in investment with property prices having increased by 4.1% annually on average in the last decade.
Seven of the top 10 cities for landlords are in southern England, which follows the pattern from last year. IN third place, London has the highest rental price per room (£627) yet with some of the lowest yields at 2.9% on purchase price of any city in the Tracker.
Oxford (4th) and Brighton (5th) fare particularly well for long term returns with an average 5.3% increase in property prices the past decade. Brighton scores well for rent, at an average of £544 per room. The city also benefits from a high number of residents who privately rent at 29%. Landlords in Milton Keynes will achieve an average yield of 5.2%, however, it has one of the smallest markets with only 17% of people privately renting.
Wales appears to be a less appealing region to invest in for landlords, with Newport and Swansea appearing in the bottom two (49thand 50th respectively). Swansea has the second lowest available rental returns (£324 per room per month) but has a respectable yield of 6%. Swansea’s long-term return is one of the lowest with an average annual house price growth of 1.5%. However, Cardiff sits higher in the table (27th) achieving respectable rent returns of £418 per room with a short-term yield of 5.6%.
The Tracker found that Yorkshire cities are producing some of the highest yields, with Hull ranked 12th on the list, producing the highest short-term yield of the 50 cities (9.2%). Other high yielding cities in this region included Barnsley (30th) and Doncaster (36th), both at 7.9%. However, Wakefield (48th) has one of the lowest room rentals (£337 per room per month) and a low rental market size of only 12%.
Jon Cooper, head of mortgage distribution at Aldermore, said: “There has been a high level of uncertainty for landlords since the Covid-19 outbreak and they have had to continuously adapt to a raft of challenges but, with so many working from home right now, it reinforces the importance of a robust and diverse private rented sector. The changing needs of renters, whether to move to a new location or a different type of property to fit flexible working demands, has created investment opportunities for landlords.
“Aldermore’s Buy to Let City Tracker shows that across the UK there is still great short and long-term returns to be had for landlords, with a number of cities providing excellent rental yields with room for capital growth. The private rented sector is vital to the economy right now and its recovery from the pandemic so landlords should seek portfolio advice from their lenders to see how they can look at new ways to support the sector.”
