The city climbed six places to knock Luton off the top spot, after it posted a capital gains growth of 17% and a buy-to-let yield of 5%.
Luton still remains a desirable market for investors, however, where continued growth in the rental market has offset the shrinking of yields, LendInvest said. The city posted a respectable 5% yield and a capital gains rate of 15% on rental price growth of 8%.
Last in the latest ranking of top 10 postcodes was Stevenage, where, despite 10% rental growth – the highest of all – capital gains were comparatively low at 9% on yields of 4%. Overall, Northampton remained the only postcode in top 10 to be located outside the South East.
LendInvest CEO Christian Faes said: “Consistency is clear here: suburban parts of the South East of England continue to offer the best opportunities for investors, while inner London continues to underperform. The absence of a large shake-up in the top 10 buy-to-let postcodes this quarter shows some stability in the market following a year of market-moving uncertainty and geopolitical shocks. This can only be good news for property professionals: there is nothing to wait for to start investing, renovating and building.
“Landlords and investors must remember that considering rental yield isn’t enough; it’s critical to find a property that impresses across all metrics. In the quarter ahead, we’ll be watching closely a number of areas that could edge towards the Top 10, like Bristol (ranked 15), Milton Keynes (16) and Manchester (21).”
There were also three new entrants to the list: Rochester (4), Watford (5) and Colchester (9). Rochester was a “rare case” where the rate of growth in rental prices – 7% – outstripped that of capital gains despite a strong 14% growth in that metric, LendInvest said.
In all, Dartford was best for capital gains with 18%, while Stevenage came out top for rental price growth.
The worst performers in the period were Galashiels in south east Scotland where capital gains were down 10% on a 4% yield and Cleveland, which achieved a yield of 5% and capital gains of 1% but saw rental prices drop 4%.
Inner London also had two postcode in the bottom five: North West and Western Central.
LendInvest compiles its rankings by giving postcodes a score based on yield, capital gains, rental price growth and transaction volumes. The data used comes from the Land Registry and property website Zoopla.