New Top UK City for Buy to Let Investment

New research reveals the top UK city for buy to let investment, based on property prices, rental demand and yield. Essential reading for any landlord looking to invest in 2022!

A report from the mortgage lender Aldermore has revealed the top cities in the UK for buy to let investments, and there has been a real national shift this year!

Manchester was looking to be one of the best cities in the UK for landlords to invest in, ranking in the top spot for Aldermore’s 2020 tracker results and with ongoing developments making the city rich in culture and opportunity. However, this year’s results see it missing from the top three spots, dropping down the 4th position. Oxford, previously in 4th place, rose to 2nd, and Cambridge was bumped down to 3rd from 2nd. Moving up a whopping six spots on the ranking, Bristol has been named Aldermore’s buy to let city of the year. Aldermore wrote that “Bristol has taken the top spot due to the long-term growth of property values in the area, and it has the lowest number of long-term property vacancies out of all 50 cities (at only 0.6% this year).”

So, as a landlord, is it time to invest in Bristol over Manchester, which had been steadily on the rise for the past couple of years? Or is this just a one-off for Bristol?

Aldermore’s Buy to Let City Tracker calculates their results based on five indicators: the average total rent, the best short-term financial gain through rental yield, long-term financial gain based on house price growth, percentage of city population within the rental market, and the lowest number of vacant properties as a proportion of total housing stock.

Bristol performed strongly across the majority of these indicators, which is why it stole first place from Manchester. Aldermore reported that the healthy market comes from more than a quarter of their population living in private rentals. Furthermore, Bristol has had an average growth of 5.1% in house prices per year since 2010. The impact of this average price growth is that “it makes it much more likely that any buy to let investor will make a good return on selling any property later down the line”.

The only area where Bristol falls short is the average rental yield. With average property prices at roughly £350,000, the likely yield is around 4.6%, 1.3% below the UK city average of 5.9%. Whilst this makes it more expensive to invest, the demand and higher rental prices still show the benefits of investing in Bristol outweigh the drawbacks.

Where does the capital sit in all of this? Ranking number six this year, the ongoing impacts of the pandemic on the city are clear for everyone to see. The trends of moving out of the commuter zones and towards areas that offer larger homes have left London in a situation that no one could have predicted pre-pandemic. However, despite the drop in rank, the city has seen some positives. London’s long-term prospective market has meant that it has remained an attractive investment, with its property prices and the high percentage of private renting residents.

Aldermore’s Buy to Let City Tracker’s Top 10 Cities

Position

2021

2020

1

Bristol

Manchester

2

Oxford

Cambridge

3

Cambridge

London

4

Manchester

Oxford

5

Luton

Brighton

6

London

Northampton

7

Northampton

Bristol

8

Brighton

Swindon

9

Reading

Reading

10

Norwich

Milton Keynes

Source: Aldermore.

As we (hopefully) return to workplaces again in 2022, and this new normal allows life to look somewhat like before, the impact on the cities we normally would frequent daily continues to change. The results from this year’s trackers offer landlords some security in investing back into cities. Jon Cooper, head of mortgage distribution at Aldermore, said that “With the economy opening up and EPC rating changes coming in 2025, now is a great time for landlords to get in touch with their broker to review where they want to take their portfolios in the future”.

To chat to an expert broker about what these results mean for your BTL plans and how to optimise your investments, call me, Sam Holder, on 01732 471659, or email me samh@mortgagesforbusiness.co.uk.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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