New league table identifies best yields for landlords

Buy to let lender Aldermore has named Bristol, as the best city for landlords to invest in for 2024. 

Manchester, Coventry, Brighton and London make up the rest of the top five.

The firm analyses five key indicators that impact buy to let desirability: 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.

With good rental prospects, a high proportion of long-term private renters available and low number of properties currently vacant, Bristol jumped to the top of the leaderboard this year. 

Growth on returns is also an attractive lure for landlords with an annual increase of 6.6 per cent. However, investing in Bristol isn’t for those looking to make a fast investment with short-term yields sitting at 4.4 per cent.

Manchester dropped one place this year from the top spot, although the average rent per room is lower at £461, and the proportion of vacancies in properties is lower at 0.9 per cent compared to the national average of 1.2 per cent, long term returns are very appealing for landlords at 6.1 per cent with a healthy market of tenants available.

Other cities in southern England also provided positive prospects for landlords including Brighton, London and Reading with higher average rents per room and strong demand from renters.

For the first time since the Aldermore ratings were launched five years ago, a Scottish city has entered the top 10 with Glasgow now in eighth place. The city provides good rental returns for landlords at £471 and offers one of the highest short-term returns of 8.6 per cent, higher than the average of 5.5 per cent.

The ratings also show the average rent per room has steadily increased, in 2021 the average room for rent was £423, while in 2022 it was £432 and this year increased to £455. 

Research by Aldermore found that nine out of 10 landlords increased the rent they charge in the last 12 months. With the current position of the rental market, the research also revealed just under three quarters of landlords have seen an increase in tenant demand for their properties in the last year.

There was no change at the bottom of the leaderboard with Newport and Swansea remaining in 49th and 50th place. 

Properties in Newport provided the lowest rent return of £292 per room compared with the average of £455, although long-term yields looked more promising at 4.9 per cent. 

However, Cardiff did climb a few places higher to make 40th place, helped by a good proportion of private renters (25 per cent available (compared to average of 22) and low number of vacant properties.

Jon Cooper, head of mortgages at Aldermore, comments: “Landlords have experienced an unprecedented year with rising interest rates, rising inflation, all while navigating their way through property legislation changes. Yet, the demand for rental accommodation has never been so high.

“Usually, a few regions dominate the leadership board, but this year we see for the first time a wider range of areas making it into the top 10. We can see that each region is made up of multiple smaller markets with their own unique conditions and challenges. 

“Landlords continue to do their research, working with their brokers to review their portfolios and ensure they are getting the best value for their properties, whatever obstacles may come their way.”

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