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Manchester tops buy-to-let sweet spot list; London makes top three

  • 23/11/2020
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Research from Aldermore showed Manchester followed by Cambridge are the top two places to rent out property in England and Wales due to a mix of demand, rental yield and property value growth over a decade.

London made it into the top three for the first time with the highest rental price per room at £627, although this does go hand in hand with some of the lowest yields at 2.9 per cent on purchase price of any city on the list.

The tracker, (see table below) which has been expanded from 25 cities in 2019 to 50 cities, emerged from five key desirability indicators including lowest number of vacancies as a proportion of housing stock in the rental market.

Manchester is both an affordable and desirable city to live in according to the tracker, scoring top in four out of the five metrics alongside its rapid pre-Covid economic growth and property investment.

Manchester also performs well on core factors such as investment returns and long-term house price growth, but it also has one of the biggest rental markets in the UK, with 31 per cent renting privately. It also has some of the lowest vacancy rates across any city and above average rental rates at £428 per room each month alongside average annual property price rises of 4.1 per cent in the last decade.

Southern value bias

Repeating last year, seven of the top ten cities for landlords are in southern England with Oxford fourth and Brighton in fifth place after London, both with average 5.3 per cent property price increases a year in the last decade. Brighton also scores well for rent, at an average of £544 per room and high numbers of residents who privately rent at 29 per cent.

However, Wales is less appealing for landlords with Newport and Swansea appearing in the bottom two at 49th and 50th respectively. Swansea has the second lowest available rental returns at £324 per room per month but has a respectable yield of six per cent but house price growth of 1.5 per cent. However, Cardiff sits higher in the table at 27th achieving respectable rental returns of £418 per room with a short-term yield of 5.6 per cent.

Yorkshire 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 at 9.2 per cent. Other high yielding cities in this region included Barnsley at 30th and Doncaster at 36th, both at 7.9 per cent. However, Wakefield at 48th has one of the lowest room rentals at £337 per room per month and a low rental market size of only 12 per cent.

Jon Cooper, head of mortgage distribution, 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.”

He added 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. 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,” he added.

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