Buy-to-let property investment can be an extremely lucrative venture, but getting the location right is one of the ultimate factors for a successful outcome.
Choosing where to invest in a buy-to-let will throw up a number of questions. Target tenant, such as student or professional, budget, and management style will all play a role in the final decision, among other things.
To give investors who are unfamiliar, or who might like to test a new area, a head-start, Aldermore has come up with a new Buy-to-Let City Tracker. It analyses the UK’s top cities, and some towns, to compile a list of the places that have the brightest prospects.
The tracker ranks cities across the country based on five key factors that impact their success rate. These are: average total rent, the best short-term returns through yield, long-term returns through house price growth over the past 10 years, lowest number of vacancies as a proportion of total stock, and the percentage of the city’s population in the private rented market.
Best of buy-to-let in the UK
This year, the city of Bristol has made a surprise appearance as the top buy-to-let location, having risen six places compared to last year. It achieved an overall score of 75 across the five areas of analysis. It stood out for its long-term growth of house prices, and the lowest percentage of vacant rentals at 0.6%.
The downside of Bristol, though, is the cost of housing there, which may make it unaffordable for some, and affect monthly yields.
Aldermore says: “Any investor will need a large amount of money to invest. With the average property price in Bristol at £348,543, likely yield will only be 4.6% on their purchase, well below the 5.9% average across the 50 cities.”
Next on the list were Oxford and Cambridge, which scored 73 and 70 respectively. Oxford has risen two places compared to last year, while Cambridge fell from second position to third. Like Bristol, while these cities may offer excellent benefits for buy-to-let landlords, high property prices are one major downside.
Manchester holds its own
Manchester has been high up on the rankings of this tracker for several years now. In second place in 2019, it rose to top position in 2020 with a score of 72. This year, despite falling to fourth place, it is still recognised as one of the best places for buy-to-let property investment in the UK.
Its economic growth makes it remain a desirable and affordable place to live. In terms of rental returns, it performs very well with relatively affordable property prices combined with strong rents. It has a large population of renters, with its universities attracting students and its strong and growing jobs market attracting postgraduates and professionals.
According to Savills, house prices in the north-west are expected to climb by an average 18.8% over the next five years, making Manchester and the surrounding areas a promising location for capital appreciation.
A good time to review your portfolio
Jon Cooper, head of mortgage distribution, Aldermore comments: “The City Tracker shows the UK housing market is rich with diverse and unique conditions across the regions that are ripe for investment opportunities. As we move towards a post-Covid environment, we hope this analysis gives food for thought to many landlords on where to look for those hidden gems and returns that meet their business strategies.
“Private landlords are a central part of the housing market, supporting over 4.5 million households in the UK and, as we emerge from the pandemic, landlords will need to meet the emerging demand for choice and variety from renters. With the economy opening up and EPC rating changes coming in 2025, now is a great time for landlords to talk with their broker to review where they want to take their portfolios in the future.”