Revealed: the fifty buy-to-let hotspots where you can still make a profit

Buy-to-let investors are currently having mixed results.

On the one hand, they struggle with high interest rates and inflation, which drive up the costs of being a landlord.

On the other hand, they benefit from strong rental growth and tenant demand. But the national picture does not tell the whole story.

The fortunes of landlords vary wildly from city to city, with rental yields – the key measure of return on your investment – ​​ranging from 3.2 percent to a healthy 8.8 percent.

Bristol has been crowned the best place in Britain for landlords to invest, according to an analysis carried out by Aldermore Bank for Money Mail.

Today we can reveal the full list of the 50 best UK cities for buy-to-let investments.

Although rental yields are typically the only major indicator used in most analyzes of the buy-to-let property market, it is only one of the key criteria that landlords should study.

In compiling the rankings, researchers assessed cities on a range of additional factors, including long-term housing price growth, the size of the rental market and the number of vacant properties in the region. And Bristol isn’t the only city experiencing a buy-to-let boom.

We spoke to letting agents in some of Britain’s booming buy-to-let markets to find out why these are a hotspot for investment – ​​and why these markets are struggling to compete.

Jon Cooper, head of mortgages at Aldermore, said: ‘Usually a few regions dominate, but this year we are seeing a wider range reach the top ten. Each region is made up of multiple smaller markets with unique circumstances and challenges.”

West Country is impressing commuters

Bristol is the number one city in Britain for landlords, largely thanks to its high average rent per room of £562 per month – 24 percent higher than the average of all 50 cities.

House prices there have risen by 6.6 percent a year over the past decade, compared to Britain’s average annual growth of 4.8 percent.

And many tenants need a home: only 0.8 percent of rental properties are vacant. Rental yields are at 4.4 percent – ​​lower than the average 5.5 percent in the 50 cities, due to Bristol’s high house prices.

The rental yield indicates how much rent the property generates compared to the price paid for it.

And the average home is now valued at £401,120, making it more expensive for landlords to generate income.

The city’s popularity, says Ben Chapman, lettings partner at Romans Lettings, is down to its now commutable distance from London and Birmingham.

Tenants have been willing to commute further since the pandemic, as many companies now allow their staff to work from home for part of the week. And Mr. Chapman says, “You can still get a lot of real estate for your money here.”

Although rents are higher than average, they remain affordable for Bristol residents, unlike rents in London, which are higher than salaries. But smart landlords don’t settle for low yields.

Mr Chapman added: ‘Most landlords aim for a rental yield of between 7 and 8 per cent, so they buy properties at bargain prices at auction for around £290,000 and renovate them to let them out for £600 per room. ‘

Manchester and London are still strong

Manchester took second place in our rankings, while London is in fifth place.

Manchester’s strengths, says Baljit Arora, director of agency Orlando Reid, lie in its affordable housing and growing population of young professionals looking to rent.

Landlords charge an average rent per room of €461 per month. A fraction higher than the average of £455 across the 50 cities, but lower than the other top ten cities Coventry, Brighton and Portsmouth.

Landlords can expect a slightly lower than average return of 5.2 per cent, but Mr Arora says this is not a deterrent for landlords in Manchester. “The demand for rentals is so high that it is less likely that the building will become vacant,” he says.

Just 0.9 percent of rental properties are vacant and almost a third of the city’s residents rent privately in Manchester, which Aldermore says reflects London’s competitive market.

In the capital, dramatic increases in rents have led to a recent slowdown in demand for tenants. The high interest rates on buy-to-let mortgages have also made things difficult for landlords.

According to property data experts Hometrack, the share of landlords who have reduced rents by more than 5 percent is highest in London.

The average rent per room in the capital is £685 per month – the most expensive in our table. But with such high house prices, the average return is low: 3.8 percent.

Coventry is a rising star

Coventry is one of the most improved cities and the most promising location for landlords looking to rent out, says Aldermore.

Compared to the bank’s analysis of previous years, the city has risen seven places between 2022 and 2023, claiming third place.

The city offers an attractive rental yield of 6.5 percent and also has strong tenant demand thanks to its two universities, Coventry and Warwick, and the employment opportunities provided by major industrial names such as Jaguar Land Rover.

Laura Green, director of Shortland Horne, said: ‘Coventry is a city that is improving, it is green and the city center is being developed. With just an hour’s train ride to London, it is an attractive commuting option.”

Over the past year, rents for a two-bedroom property have risen from £800 to £900 per month, but this remains affordable for many potential tenants.

Hull and Glasgow offer the best yields

Yield hunters looking to quickly offset the cost of a purchase can look to Hull, which has the best yield of all 50 UK cities – at 8.8 per cent.

Landlords charge an average of £416 per bedroom for properties in the Yorkshire city – lower than the average £455 elsewhere.

This equates to an estimated £12,480 in rental income per year, with the average home having 2.5 bedrooms. But the lower rental price is offset by the stock of relatively cheap homes, with a typical property costing just £141,346.

Despite having the highest yield, Hull is halfway down our table in 26th place. It scores poorly in terms of annual house price growth over the past decade – 3.7 percent compared to the average 4.8 percent for the cities in our list – and the number of vacant properties.

Glasgow has the second best rental yield of all UK cities, at 8.6pc. But it scores much higher than Hull when other key indicators are taken into account – ranking eighth.

That’s because landlords can expect rental income of £14,700 on the average property, which costs £170,914. Annual house price growth is a healthier 5.3 percent, higher than the average, and there are few vacant properties. The only weak point is that only 19 percent rent privately.

Low yields lead to Oxford blues

After narrowly missing out on tenth position in 2022, Oxford fell 17 places to 28th.

Rental yields per room are higher than the national average at £596 and there is a high percentage of renters, but yields are one of the lowest of any city at 3.4 percent due to high property prices.

Rhys Hathaway, director of family business Hathaway’s Estate and Lettings Agency, says house prices in Oxford skyrocketed during the stamp duty holiday in 2020 and 2021 and many landlords decided to cash in due to the situation and therefore exited the market completely.

“The majority of the landlords we have here are small, casual landlords and not large-scale professionals,” he added.

‘Demand for apartments and houses has fallen over the past twelve months. We received ten to twenty applications per home, now there are five to ten.’

He does indicate that homes are still rented out quickly and that the demand for shared homes is high.

…And the worst places to invest?

The Welsh cities of Newport and Swansea rank 49th and 50th for the third year. They attract low rental prices of £292 and £316 per month respectively.

The properties are priced below average but cost more than, for example, in Bradford, which commands a rental price of £390.

Buy-to-let agent Sunny Budhdeo, director of Unique Property Finance, says Swansea is popular with landlords buying large houses or commercial properties to convert into luxury student accommodation.