The Property Options Buy to Let Market Overview
Our regular Bristol and UK property reports are written by economist Chris Worthington, who is a regular speaker at our PIMs.
Where to invest in BTL in the UK
This month our market overview looks into where to invest in a buy to let (BTL) property in the UK.
The Aldermore Bank has published a report entitled “The Buy to Let City Tracker”. The report ranks 50 towns and cities in the UK for BTL investment, based on a composite score, taking into account
- house prices;
- average rental yields (the annual rent divided by the value of the property);
- the forecast house price growth in 5 years;
- the lowest number of vacancies; and
- the percentage of the local population in rented housing.
Manchester is top of the league table, with one of the biggest rental markets in the UK at 31% of the housing and low vacancy rates.
Seven of the top ten locations are in Southern England including Oxford (4th), Brighton (5th) and Bristol (7th).
Wales appears to be less appealing for BTL investors, with Newport (49th) and Swansea (50th) at the bottom of the league table. However Cardiff performs reasonably well at 27th place, boosted by the benefits of being a capital city.
The City Tracker found that some of the highest yields are in Yorkshire – including Hull (9.2%), Barnsley (7.9%) and Doncaster (7.9%).
Jon Cooper, head of mortgage distribution at Aldermore commented “The buy to let city tracker shows that across the UK there are still great short and long term gains to be had, with a number of towns and cities providing excellent rental yields with room for capital growth”.
London has some of the lowest yields in the UK, primarily because of the high house prices especially in central London.
These high house prices have caused home owners to move to the outer London suburbs or even further out to towns such as Bracknell, St Albans, Sevenoaks and Basingstoke.
The significant trend towards moving out of central London to the outer boroughs or to these commuter towns will place an upward pressure on house prices and rents in those locations, providing new opportunities for BTL investors.
Yields are a key metric for BTL investors and again there is considerable variation within towns and cities and across a region.
Investors should “do the math” and work out the yields for possible new investments.
In the long term, the forecast capital growth becomes a more important consideration and property in major regeneration areas should do well in that respect.
Our Next Property Meeting
We will all be discussing the latest position on the property market in Bristol and across the UK in the light of Covid-19 at our next PIM.
We’ll be arranging this when it is safe and practical to do so.
Meanwhile, stay safe.