Manchester tops for buy-to-let investment

Aldermore’s new Buy-to-Let City Tracker reveals Manchester ranks as the best city in the UK for buy-to-let investment, performing well across four out of five of our key indicator

• Oxford is knocked off 2019’s top spot and now sits in 4^th place, while Cambridge has made the biggest jump from 8^th in 2019 to 2^nd in 202
• London now features in the top three, hitting the top spot for average total rent, while Hull, in 14^th place, provides the highest yields for landlord
• The South East remains the best region for buy to let investment with four cities making the top 10 – Oxford (4^th), Brighton (5^th), Reading (9^th) and Milton Keynes (10^th
• Cities in Wales have fared worst with Newport (49^th) and Swansea (50^th) sitting at the bottom of the lis
• Northampton (6^th), Swindon (8^th) and Reading (9^th) are new entries into the top 10 for 2020

Aldermore’s Buy to Let City Tracker, analysing 50 cities across the UK to understand the top places for landlords to invest in, has found Manchester, closely followed by Cambridge, to be the best.

The Tracker, which has been expanded from 25 cities in 2019 to 50 cities, was 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.

Aldermore’s Buy to Let City Tracker’s Top ten cities:

Manchester leads the way

Although Manchester has experienced stricter lockdown measures than other parts of the country, the 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. This helped them win the top spot in our City Tracker, with good scores on four out of five metrics.

Manchester’s main selling points for private landlords are that it performs well on core factors such as rental returns and long-term house price growth, but more importantly it 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.

 Southern England continues to dominate for long-term investment

Continuing a trend from last year, seven of the top 10 cities for landlords are in southern England. London (3^rd), unsurprisingly, has the highest rental price per room (£627) although this does go hand in hand with some of the lowest yields at 2.9% on purchase price of any city in the Tracker.

Oxford (4^th) and Brighton (5^th) 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 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 (49^th and 50^th 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 (27^th) achieving respectable rent returns of £418 per room with a short-term yield of 5.6%.

Yorkshire best for highest yield

The Tracker found that Yorkshire cities are producing some of the highest yields, with Hull ranked 12^th on the list, producing the highest short-term yield of the 50 cities (9.2%). Other high yielding cities in this region included Barnsley (30^th) and Doncaster (36^th), both at 7.9%.  However, Wakefield (48^th) 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, 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. 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.”