A ‘city tracker’ operated by a specialist buy to let mortgage company has outlined the best - and worst - places for landlords to invest for yields.
“Across the UK there are still great short and long-term returns to be had for landlords, with a number of cities providing excellent rental yields with room for capital growth. 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” according to Jon Cooper, head of mortgage distribution at Aldermore.
Manchester: Aldermore says the rapid economic growth that was seen pre-Covid and the significant investment in commercial and residential developments over the past five years, has made it a desirable and affordable city to live in.
“Manchester’s main selling points for private landlords are that it performs well on core factors such as rental returns and long-term house price growth, but more importantly it has one of the biggest rental markets in the UK, with 31 per cent of Manchester’s population being private renters” says the firm.
It also has some of the lowest vacancy rates across any city analysed by the lender. This is combined with above average rental ability (on average £428 per room per month) and security in investment with property prices having increased by 4.1 per cent annually on average in the last decade.
Southern England: Seven of the top 10 cities for landlords’ best yields are in southern England. London - which is in third place in the region - unsurprisingly has the highest rental price per room (£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.
Oxford (4th) and Brighton (5th) fare particularly well for long term returns with an average 5.3 per cent increase in property prices the past decade. Brighton scores well for rent, at an average of £544 per room. The city also benefits from a high number of residents who privately rent at 29 per cent. Landlords in Milton Keynes will achieve an average yield of 5.2 per cent, however, it has one of the smallest markets with only 17 per cent of people privately renting.
Wales: Aldermore says this is “struggling across the board” with Newport and Swansea appearing in the bottom two - 49th and 50th respectively - of the lender’s league table.
Swansea has the second lowest available rental returns (£324 per room per month) but has a yield of 6.0 per cent. Swansea’s long-term return is one of the lowest with an average annual house price growth of 1.5 per cent. However, Cardiff sits higher in the table (27th) achieving returns of £418 per room with a short-term yield of 5.6 per cent.
Yorkshire: In line with many other surveys, Aldermore has found that Yorkshire cities are producing some of the highest yields, with Hull ranked 12th, producing the highest short-term yield of the 50 cities (9.2 per cent).
Other high yielding cities in this region included Barnsley (30th) and Doncaster (36th) both at 7.9 per cent. However, Wakefield (48th) has one of the lowest room rentals (£337 per room per month) and a low rental market size of only 12 per cent.