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Find out which cities are achieving the highest rental yields across the Northern Powerhouse. When embarking on the journey of property investment, investors tend to consider a range of factors. In a buy-to-let investment, there are two main streams of income. This includes rental yields and capital growth. Let’s break this down:
A rental yield is an annual return an investor is likely to achieve when letting a property out to a tenant. To calculate the percentage, divide the yearly rental income of a property by the amount that has been invested in the property.
Capital growth is an increase (or decrease) in the value of an investment over time. It is measured by the difference between the current value of a property and the purchase price. Therefore, a clear indication of your profit on a long-term investment.
What are the Average Rental Yields per Region, 2021?
From the table, it is evident London is home to the most expensive properties. The average price for a property in London is £666,160. This is £415,160 above the UK average house price of £251,000! As a result, this affects overall rental yields and positions the value below the UK average. Therefore, not the most profitable short-term investment.
However, the highest rental yields are shown across the North West (4.7%) and Yorkshire and the Humber (4.6%). Property prices in the North are more affordable in comparison to London and many are listed below the UK average house price. There is also an increase in rental demand in these areas, mainly driven by the London exodus to the north. Therefore, investors can expect higher rental yields and a much larger ROI.
Manchester Ranks as Best City for BTL Investment
Aldermore Bank’s latest Buy to Let Tracker reveals the best areas in the UK for a buy to let investment. The Tracker analyses 50 UK cities and assesses five key indicators:
The average total rent
The percentage yield (indicating the best short-term returns)
Capital growth (projecting long-term returns)
The city with the lowest number of vacancies
The percentage of the city population in the rental market
This year, Manchester takes the lead as the best city for a buy to let investment. The booming city has moved up from second place in 2019, pushing Oxford off the #1 ranking. Strong rental demands in Manchester have had a positive impact on the construction industry. Consequently, this has led to a rise in BTL construction to keep up with demands. Manchester is one of the biggest economic investment hotspots for both local and international investors. The city has received significant funds for regeneration projects over the years, boosting its capital growth. Therefore, increasing property prices.
Purchasing property in Manchester proves to be a stable and secure investment. The city has one of the biggest rental markets in the UK, with over 31% of its population living as private renters. Nevertheless, Manchester’s city centre population continues to increase. Over the last 5 years, the population has risen from 35,000 to 60,000 in the city centre. Forecasts predict the number will grow to 100,000 by 2025. Therefore, widening the pool of potential tenants – from the current model of students and young professionals to working professionals aged 35-49, choosing to live in apartments.
Properties in Manchester generally have higher rental returns and a low vacancy rate – ideal for potential investors. Data from Aldermore Bank reveals the city boasts the lowest vacancy rate of only 0.5%.
Yorkshire Cities Achieve Highest Rental Yields
Earlier this year CityRise released an article on an upcoming investment hotspot, featuring the city of Hull. Data released by the Tracker reveals Hull achieves the highest short-term rental yields of 9.2% across the 50 cities in the UK. Cities of Yorkshire & the Humber perform the strongest in terms of overall rental yields, this is primarily due cheaper house prices and rising demands. Cities following Hull include Barnsley and Doncaster, both attaining high yields of 7.9%.
The data below consists of cities in the northern regions which are listed in the Top 50 rankings table of Aldermore’s Buy to Let City Tracker.
Let us Guide You in Your Property Investment Journey
At CityRise we believe Northern regions will continue to thrive. A major factor includes the reasonable property prices, which are lower than the average prices across the UK. Property prices in the North are significantly lower than those in London, and project the highest rental yields – could you be missing out on a profitable investment?
We are certain this will cause a ripple effect in neighbouring towns. Towns at a convenient and commutable distance to the city centres could also face the surplus of increasing demands and higher rental yields as capital growth continues.
Get in touch today with one of our Investment Consultants. Our experts will help by providing their unbiased opinions and offering relevant, clear and professional advice. Whether you’re a first-time buyer, looking to step onto the ladder or a seasoned investor in the search for the next opportunity, or even a developer looking to achieve the best out of your development – chat with us touch today.
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