The bank analysed and assessed five key indicators that impact desirability; average total rent, the best short-term returns through yield, long-term return through house price growth over the past ten years, the lowest number of vacancies as a proportion of total housing stock, and percentage of the city population in the rental market.
Aldermore’s Buy to Let City Tracker rankings table:
Oxford leads the way
Oxford’s rapid growth and investment has narrowly won the city top spot in our City Tracker, with good scores on four out of five metrics. Oxford's main selling point for private landlords is that it has one of the largest private sector markets of all 25 cities, with 28% of all residents in the city renting privately. This is combined with above average rental ability (on average £596 per room per month), a low level of vacant properties, and security in investment with property prices having increased yearly by on average 4.8% the past decade. The only sore spot is that short term return through yield is one of the lowest on the list.
London still in high demand
London ranks in fourth place behind second place Manchester and third place Edinburgh. In some cases, London does outperform Oxford. For example, property prices have increased faster at 5.5% a year on average over the past decade (compared to 4.8% in Oxford). However, despite strong rental prices (at £630 per room per month); very high property prices in London (£617,238 on average) means annual rental yields are very low for a new buy-to-let purchase at only 3.0%.
Southern England dominates for long-term investment
Seven of the top ten cities for landlords are in southern England. Both Bristol and Oxford fare particularly well for long term returns, with an average 4.8% increase in property prices. Brighton scores well for rent, yielding an average of £507 per room. The city also has one of the largest market sizes across the UK, with a staggering 28% of inhabitants privately renting. Milton Keynes ranks poorly for short-term yield, at 4.3%; one of the lowest in the City Tracker combined with the small private rental market in the top 10 (only 17% of residents privately rent here). However, there is still a demand for properties here, with only 1.8% of properties lying vacant.
Yorkshire struggles across the board
Yorkshire appears to be an unappealing region to invest in for buy-to-let, with three cities in the county in the bottom six. Sheffield has one of the lowest rental prices (£324 per room per month), and is not a good short-term investment, with a below average yield of just 5.3%. Bradford meanwhile suffers with poor price rises (only 1.6% per year) and a high number of property vacancies (4.1%). However, Hull ranks at 12th on the list, boosted by the highest short-term yield of all 25 cities (9.3%).
Midlands has a varied market
Nottingham ranks 7th on our list offering a very strong short-term yield at 7.3% and the market size is also impressive (24% are private renters), just behind London (25%). On the other end of the spectrum, Wolverhampton sits at the bottom. The city has the smallest rental market (only 12% of residents privately rent). As a result, vacancies are above average (at 3.1% of properties) suggesting that landlords might struggle to always fill their properties.
Damian Thompson, Director of Mortgages, Aldermore comments: “Aldermore’s Buy to Let City Tracker shows there are still great short and long-term investment opportunities for landlords. The number of people renting in the UK has been rapidly growing, up 1.7 million in ten years2, so private landlords are an increasingly central part of the housing market as supporting a robust and strong Private Rented Sector becomes more essential.
The UK housing market has never been a singular thing, instead made up of multiple smaller markets with their own unique conditions and challenges. There have been numerous regulatory changes recently and persistent economic uncertainty but this affects every region differently. Going forward, landlords will need continual backing and advice from lenders and the wider industry so they can provide choice, diversity of tenure and quality properties for renters.”
