Buy-to-let has always been an appealing investment model providing landlords with an opportunity to leverage peoples need for housing who don’t have the financial position to get themselves onto the property ladder.
Buy-to-let hotspots typically mirror worker or student demand where property remains good value for money within sensible commuter distance to key business and industry centres. London and key urban centres have traditionally been buy to let hubs, but with increasing property values in the south of England making yields less strong in percentage terms, it is no surprise that the Midlands and North of the United Kingdom have now come to dominate the Top Ten.
Birmingham takes the top spot among out Buy-to-let hot spots for 2020. With 1.2 existing residents, Birmingham’s growth has outpaced all other UK cities outside the Capital. The new High Speed Two (HS2) railway construction is predicted to reduce the commute to London to just 1 hour 22 minutes. This combination of new infrastructure and economic growth alongside stable house prices makes it likely that Birmingham will remain among the top ten buy-to-let hot spots for investors in the coming years.
Manchester has enjoyed the ‘ripple effect’, a term used to describe the rising wave of house prices outward from a central point of high activity. There is high demand for rental housing. According to Rightmove, Manchester was the UK’s second most-searched for rental location outside of London in 2019. Over 50% of students remaining in the city post graduation providing part of this market, while the cities popularity with young families also underpins rental demand.
Liverpool is one of the highest performing buy-to-let hotspots. The city has many on-going and upcoming developments in the pipeline and is an attractive aspect for young professionals. Jones Lang LaSalle predicts that property prices in central Liverpool will rise by 2% and rents by 3.5% throughout 2020. This provides would-be landlords an excellent opportunity to leverage a growing market.
Sheffield is a surprising addition to this table for most, but it sits in the top 5 owing to the low house prices as well as the significant infrastructural investment in the city. Sheffield has relished in a revamp of the cities shopping district costing £480 million, improving its amenities. Over the last 20 years house prices have grown by 223%, eye catching for those looking for capital gains in combination with the opportunity for rental yields.
Like Sheffield, house prices in Leeds make the buy-to-let proposition particularly attractive. The population in Leeds is growing seven times faster than London, and with £7 billion of development planned, Leeds is set to double in size. A Jones Lang LaSalle report from 2018 predicts average rental value growth of 3.5% per year over the next five years.
Leicester’s house prices are very affordable for buy-to-let land lords despite having achieved growth of 250% since 2000. According to Leicester Property Insight, the town offers an annual rental growth at 3.02% with accelerating growth year on year and an average rental yield of a modest 4.19% coupled with average house price growth of 6.28% – giving a total yield of a ‘whopping’ 10.47%. Those figures are hard to argue with!
A central location with good access to London (1 hour 40 minutes), Nottingham sits at number seven. The city is extremely popular with students, many choosing to stay in the city following completing their studies, since 2014 prices have grown nearly 20% and with Nottingham becoming an attractive place for many young professionals Seven Capital have predicted much more growth in the next year.
Oxford has one of the strongest economies in the UK, making it an attractive city for many investors. Although property growth has slowed since 2016, Oxford still ranks 3rd in the UK for growth overall in the past 10 years. With good connections between London, Cambridge and Heathrow, Oxford is still extremely attractive to those looking to invest in rental properties. Its strong student market and a preponderance of businesses also provides support to the buy-to-let market.
Cardiff has had recent regeneration and improvements to infrastructure, particularly with the new South Wales Metro. Cardiff is seen as an up and coming city by many investors, with population tipped to grow the fastest out of any core UK city in the next 20 years. Yields vary quite significantly by postcode within Cardiff, so research is the key before jumping into this market.
In spite of the high prices to buy property in London, the city is impossible to ignore for buy-to-let investors. Closing off the top 10, the Capital has been named the number one city in the world for students and ranked second in the worlds top financial centres. Rental rates are high and demand is strong for rooms and smaller homes which tenants accept in exchange for the excitement and shortened commuting times that living in London provides. This means that the yield for London landlords is still relatively high. Demand is underpinned by the high house prices that prevent a number of young professionals getting onto the property ladder. In London in particular, there is a prevalence of room-only rentals popular with young professionals, which typically result in higher yields, albeit with higher risk, for landlords.
House Marketing are familiar with creating marketing solutions for property schemes offering a buy-to-let offering and keep up to date with market trends and conditions so that we can respond effectively in a continually changing market. If you think your scheme should be promoted to buy-to-let investors and would like to package your buy-to-let offering, get in touch to see how we can help.
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