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Top 10 buy-to-let hotspots

Top 10 buy-to-let hotspots

Category: Buy To Let

Updated: 02/06/2014
First Published: 02/06/2014

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This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The rental market is definitely booming. Surging property prices mean a lot of people find themselves turning to rented accommodation, while the likes of university cities add a whole other element of potential – and the yields that can be achieved are highly attractive.

Confidence in the sector only ever seems to be on the rise and it could be a great time to get on board, but if you're planning to get on the BTL bandwagon or are looking to expand your portfolio, it's worth knowing the areas that perform best.

Luckily, HSBC has done the hard work for you. Their research has identified the top 10 rental hotspots across the UK, based on how much of a return you'll get from your investment, and the results are impressive. Let's take a look.

  1. Southampton. Average house price = £143,011, average rent = £1,040 monthly/£12,480 annually, resulting in a gross rental yield of 8.73%.
  2. Manchester. Average house price = £104,244, average rent = £693 monthly/£8,316 annually, resulting in a gross rental yield of 7.98%.
  3. Nottingham. Average house price = £86,000, average rent = £550 monthly/£6,600 annually, resulting in a gross rental yield of 7.67%.
  4. Blackpool. Average house price = £77,899, average rent = £495 monthly/£5,940 annually, resulting in a gross rental yield of 7.63%.
  5. Kingston upon Hull. Average house price = £68,243, average rent = £425 monthly/£5,100 annually, resulting in a gross rental yield of 7.47%.
  6. Coventry. Average house price = £110,029, average rent = £650 monthly/£7,800 annually, resulting in a gross rental yield of 7.09%.
  7. Oxford. Average house price = £254,514, average rent = £1,489 monthly/£17,868 annually, resulting in a gross rental yield of 7.02%.
  8. Portsmouth. Average house price = £146,709, average rent = £795 monthly/£9,540 annually, resulting in a gross rental yield of 6.50%.
  9. Liverpool. Average house price = £91,175, average rent = £494 monthly/£5,928 annually, resulting in a gross rental yield of 6.50%.
  10. Cambridge. Average house price = £185,414, average rent = £1,001 monthly/£12,012 annually, resulting in a gross rental yield of 6.48%.

As you can see, the results are impressive. The typical return could be substantial and it could prove to be a great investment, with Southampton clearly leading the way.

"Landlords are reaping the benefit as young professionals say goodbye to capital living in favour of more affordable commuter towns. House prices in these locations – while still out of reach among many first time buyers – are relatively affordable for landlords investing in property and the demand from young professionals has pushed up rents and driven up the returns," said Peter Dockar of HSBC.

However, what about those cities where yields are growing the fastest? Reading, for example, posted annual yield growth of 12.8% (with the typical yield standing at 5.48%) while Brighton and Hove posted growth of 12.6% (average yield is currently 6.17%) – they may not take the top spot now but, if this kind of growth continues, they could well be a contender in the future.

What might be surprising is that London doesn't make the grade. A lot of would-be landlords might be drawn to the capital given the fact it has the highest rents in the country, but this needs to be offset against the cost of the property itself – the yields and ultimate returns are therefore typically a lot lower than they are in some other cities (the highest yields in the capital can be found in Newham at 6%), so it'll pay to do your research to find the right property for your aspirations.

Doing so can ensure you're able to met your goals and generate a decent level of income from your investment, and when looking at total annual returns the figures are even more appealing.

Additional research from LSL Property Services found that, in April, total annual returns (which take into account price growth alongside void periods between tenants) on the average rental property stood at 10.3%. In absolute terms this means that the typical landlord saw a return of £16,887 over the previous year, with rental income of £8,057 and capital gain of £8,830.

It can't be denied that it's a great return, and a bit of research can go a long way. So, no matter where you're choosing to start (or expand) your portfolio, make sure to put yield calculations at the forefront of your mind – and then all you've got to do is find the right buy-to-let mortgage to keep your costs to a minimum.

What Next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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