Buying a property for the purpose of generating a second income became quite popular in the last couple of years. The number of prospective tenants drastically outnumbered the amount of rental accommodation, meaning landlords were in demand. Despite rising mortgage rates and changes to EPC regulations, which have meant many landlords have had to sell, rental properties are a profitable business. The question is, where should you buy a buy-to-let? Which UK region has the best rental yields?
That region is Manchester. Long recognised as a thriving city and a cultural, historic hub of the north, Manchester is a great city for buy-to-lets. According to recent data, Manchester boasts an average rental yield of 5.5%, making it the most lucrative city for rental investments in the UK.
The ranking comes from Aldermore Bank’s Buy to Let City Tracker. It uses five dimensions to rank cities across the UK for their buy-to-let value, which include average total rent, short-term yield returns, long-term returns through house price growth over the last decade, the lowest percentage of vacancies in relation to total housing stock, and the proportion of the city population in the rental market. Manchester soared to the top of the list, followed by London, Bristol, Cambridge, and Peterborough. These five UK cities were deemed the best to invest in for landlords based upon their rental yields.
Manchester, in particular, stands out as an attractive investment opportunity with an average property price increase of 5.6% since 2010, bringing it to £247,341, and a rental yield of 5.5%. Furthermore, 31% of Manchester’s population rent privately, and according to Money Week, the average rent per room at £454 is significantly higher than other northern English cities.
So what makes Manchester such a great investment destination for rental properties? Well there are several factors that contribute to the city’s high rental yields. A university city; Manchester is home to the University of Manchester, Manchester Metropolitan University, and the University of Salford. This means plenty of students are in need of accommodation, as well as graduates and young professionals who stay living in the city.
Manchester also has a growing population. Between 2011 and 2021, the population grew by 9.7%, according to ONS. This means that demand for rental properties is likely to remain high, driving up rental prices and yields.
One of the most important reasons why Manchester is the best region of rental yields in the UK is the continuous flow of construction projects. The city is undergoing significant regeneration, with several major developments currently underway. This includes the £1.4 billion Northern Gateway project, now known as the Victoria Riverside scheme. There’s also One Port Street, Mayfield, and many others.
Looking at the rest of the top 5, it’s clear to see why Manchester is the most attractive city. London moved up from sixth place to second place. While it boasts the highest average room rent at £660, the yield is comparatively low at 5.1%. Bristol, on the other hand, has an average room rent of £519 and offers a yield of 4.4%. However, the city’s average annual increase in house prices is 5.7%.
In Cambridge, the average rent for a room is £552, and the average house price stands at £533,192 with an annual price increase of 5.6%, while the rental yield is 3.1%. Meanwhile, Peterborough has jumped an impressive 11 places to secure fifth place, with property price growth rising from 3.86% to 5.2% between 2021 and 2022. The city offers a rental yield of 6.1%.
So if you’re a landlord looking to invest, you know where to head to! When buying any property, but especially for rentals, it’s important to ensure it meets all the legal, health and safety requirements.
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At CJ Bloor, we’re proud to serve Manchester; an exciting city with characterful and diverse homes. Our team of building surveyors in Manchester are on hand to help you determine if your new rental property is fit for purpose, so you’re well-informed before you buy.
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