New research has indicated that many buy-to-let investors are leaving London behind in order to secure the best opportunities.
For years, the capital has represented the number one region for yields and soaring tenant demand. Now, with property prices in the city spiralling out of reach, investors are being forced to look further afield.
Best to invest
Data from a report by Savills assesses the top drivers of the rental market and identifies the best cities for buy-to-let investment.
The research discovered that Manchester, Reading and Bristol were the top-three areas in which landlords should invest. This is due to their strong economic growth and reputations as desirable locations to live in.
Though not an exhaustive list, Savills looked at invest prospects in areas where a substantial housing shortfall is expected. This was coupled with the economic potential of every city, including analysis of past and future growth sectors.
In addition, the report examined the investment potential of each city, taking into account the net income return, chances of rental and capital value growth and supply and demand. This included household projections, growth forecasts and local competition.
Eventually, the top ten cities for investment were found to be:
- Manchester
- Reading
- Edinburgh
- Bristol
- Brighton
- Leeds
- Glasgow
- Cardiff
- York
- Milton Keynes
Where are the top cities for buy-to-let investors?
Northern soul
‘House prices in London are about five times what they are in Manchester, but salaries re only 30% higher,’ noted Peter Armistead of Armistead Property. ‘Manchester is a very affordable place to live and demand for property is soaring in the city, thanks to the expansion of the MetroLink tram system, the trendy Northern Quarter and the BBC Media City.’[1]
‘Manchester has vibrant restaurants, bars, clubs plus a great music scene, galleries and museums,’ Armistead continued. ‘It also has an amazing student community and its universities, teaching and research facilities are truly wolrd class. It is home to nearly 100,000 students, making it one of the largest student cities in Europe. Despite all of its many advantages and attractions, Manchester is a very affordable place to live and many students chose to carry on living there after they graduate, as well as graduates from other areas moving to Manchester. Furthermore, wages relative to property costs are a very important factor in attracting these people.’[1]
Concluding, Mr Armistead said, ‘Manchester is a great place for BTL investment. An average residential property in Manchester is just £155,000, while a flat in a good area costs as little as £120,000. A property in the city can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper. It’s not surprising that investors are turning away from London to more fruitful, regional cities like Manchester. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.’[1]
[1] http://www.propertyreporter.co.uk/landlords/savills-research-reveals-top-ten-btl-cities.html