Manchester the top BTL investment hub as hidden gems found UK-wide

27 November 2020 | Investment

Manchester has topped the list of the best areas for landlords to invest in, according to Aldermore’s ‘Buy to Let City Tracker’.

The tracker assessed five key indicators that impact desirability – average total rent, short-term returns through yield, long-term return over 10 years, the lowest number of vacancies as a proportion of total housing stock, and percentage of the city population in the rental market – in 50 cities across the UK.

We analyse its findings below…

Manchester leads the way

Although the city has experienced stricter lockdown measures than other parts of the country, the rapid economic growth seen pre-Covid and the significant investment in commercial and residential developments over the past five years has made it a desirable place to live in.

According to Aldermore, Manchester’s main selling points for private landlords are that it performs well for rental returns and long-term house price growth. More importantly, though, it has one of the biggest rental markets in the UK, with 31% of Manchester’s population being private renters.

The city also has some of the lowest vacancy rates across any city included in the tracker.

This is combined with above average rental ability (£428 per room per month) and security in investment with property prices having increased by 4.1% annually on average in the last decade.

Southern England dominates for long-term investment

The tracker revealed seven of the top 10 cities for landlords are in southern England, continuing the trend from last year.

In third place, London has the highest rental price per room (£627), but this aligns 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 in the past decade.

Brighton scores well for rent, at an average of £544 per room, and benefits from a high number of residents who privately rent at 29%.

Meanwhile, landlords in Milton Keynes can achieve an average yield of 5.2% – however, it has one of the smallest markets, with only 17% of people privately renting.

Wales struggles across the board.

Wales appears to be a less appealing region to invest in for landlords, with Newport and Swansea appearing in the bottom two (49th and 50th respectively).

Swansea has the second lowest available rental returns (£324 per room per month) but has a respectable yield of 6%. Its 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%.

Yorkshire the best for highest yield

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, comments: “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.”

He concludes: “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.”

The table below shows the top 10 BTL cities according to the tracker:

Ranking

City

Region

Overall score

1

Manchester

North West

72

2

Cambridge

East

72

3

London

London

71

4

Oxford

South East

70

5

Brighton

South East

69

6

Northampton

East Midlands

69

7

Bristol

South West

69

8

Swindon

South West

67

9

Reading

South East

67

10

Milton Keynes

South East

64

This post has originally been featured in Property Investor Today.