Manchester reclaims top spot as best city for buy-to-let investment
Manchester is the best city for buy-to-let investment in 2023, climbing three spots since last year due to robust property prices and strong rental demand.
Manchester has returned to the top spot after last holding that lofty position in 2020, according to Aldermore Bank’s buy-to-let city tracker.
The tracker measures desirability with five key indicators – 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 the percentage of the city population in the rental market.
The report noted that since 2010, the average property price had gone up 5.6% and currently stands at £247,341.
Around 31% of the city’s residents are privately renting, which Aldermore said gave landlords the benefit of short-term demand and the opportunity to make a good return if they want to sell the property at a later date.
The average rent for the city is £454, and is high compared to other cities like Warrington, Liverpool and Wigan.
London climbs to second spot
London climbed to the second spot from sixth last year, having fallen there third in 2020.
The report said that the capital offered the highest average room rent for all cities in the tracker, but shorter term yields remain low at 5.1%.
Demand and size of the private rental market is “healthy” at 29%, which is higher than the national average of 21%.
Peterborough and Milton Keynes record largest rise
Bristol, Cambridge and Peterborough rounded out the top five, with Bristol falling two spots from last year and Cambridge going down one spot from 2021.
Peterborough climbed 11 spots since last year, with Milton Keynes rising 28 spots since last year to sixth place.
The report said that people working from home and good rail links made Peterborough and Milton Keynes “attractive bases” for commuters.
The long-term return prospects have also improved, with Milton Keynes rising from 4.6% in 2021 to 5.6% in 2022 and Peterborough growing from 3.86% to 5.2% in the same period.
Aldermore added that both cities had above average rental values, which would make them attractive prospects for landlords looking to grow their portfolio.
Cities in East of England dominate top 20
The report found that seven cities in the East made into the top 20, which is the highest for any region.
This included Cambridge, Peterborough, Luton, Southend, Basildon, Norwich and Chelmsford.
The report said that all the cities offered good long-term returns, especially Southend which recorded the biggest annual increase in house prices of all 50 cities with 5.9% growth.
Oxford dropped from second place to 11th place, with the main factors being fall in rental revenue, lower short-term yield and a drop-in long-term returns
Leicester, Northamption and Derby also all fell in this year’s tracker.
Jon Cooper, head of mortgages at Aldermore, said: “In its fourth year, our City Tracker highlights how quickly the UK housing market moves across the country. Year on year, we’ve seen the cities offering the best investment for landlords shift consistently.
“This highlights how landlords really have to be on top of their game to ensure they maximise their investment, looking for areas that offer value not only for the short term but for the longer term too.”
He added: “The mortgage industry has experienced a series of testing events with interest rates hikes, uncertainty in the UK economy, as well as stamp duty shifts and looming Energy Performance Certificate changes; factors that are not only affecting landlords but also their tenants, putting both groups under pressure.
“We encourage landlords to work together with their brokers, reviewing their portfolios to ensure they’re future proofed for further shocks that may lie ahead.”