Oxford tops the list for buy to let investment

Aldermore’s new Buy to Let City Tracker reveals that Oxford ranks the best city in the UK for buy to let investment, performing well across four out of five key indicators
London lies in fourth place, behind Manchester and Edinburgh, with Norwich rounding off the top five
The South East is the best region for buy to let investment with three cities making the top ten; Oxford (1st), Brighton (9th), and Milton Keynes (10th)
Cities in Yorkshire fare worse with two in the bottom five – Bradford (23rd) and Sheffield (22nd) – with Leeds in 20th place
Wolverhampton sits at the bottom of our list, despite other cities in the West Midlands such as Birmingham and Coventry performing impressively
London is top for average total rent, Hull has the best short-term returns through yield, Cambridge was number one for long-term house price growth, Cardiff has the lowest number of housing vacancies, and Oxford has the highest percentage of population renting.

Aldermore’s new Buy-to-Let City Tracker¹, analysing 25 cities across the UK to understand the best places for landlords to invest in, has found Oxford, closely followed by Manchester, to be the best. The Tracker was determined by analysing and assessing five key indicators that impact desirability; average total rent, the best short-term returns through yield, long-term return through house price growth over the past ten years, the lowest number of vacancies as a proportion of total housing stock, and percentage of the city population in the rental market.

Aldermore’s Buy to Let City Tracker rankings table

Ranking	City	Region	Overall score
1	Oxford	South East	74
2	Manchester	North West	72
3	Edinburgh	Scotland	72
4	London	London	71
5	Norwich	Eastern	66
6	Bristol	South West	64
7	Nottingham	East Midlands	63
8	Cambridge	Eastern	63
9	Brighton	South East	60
10	Milton Keynes	South East	55
11	Plymouth	South West	54
12	Hull	Yorkshire	49
13	Leicester	East Midlands	49
14	Coventry	West Midlands	49
15	Southampton	South East	48
16	Birmingham	West Midlands	47
17	Liverpool	North West	44
18	Cardiff	Wales	39
19	Glasgow	Scotland	37
20	Leeds	Yorkshire	32
21	Derby	East Midlands	31
22	Sheffield	Yorkshire	30
23	Bradford	Yorkshire	29
24	Newcastle	North East	26
25	Wolverhampton	West Midlands	25

Oxford leads the way

Oxford’s rapid growth and investment has narrowly won the city top spot in our City Tracker, with good scores on four out of five metrics. Oxford's main selling point for private landlords is that it has one of the largest private sector markets of all 25 cities, with 28% of all residents in the city renting privately. This is combined with above average rental ability (on average £596 per room per month), a low level of vacant properties, and security in investment with property prices having increased yearly by on average 4.8% the past decade. The only sore spot is that short term return through yield is one of the lowest on the list.

London still in high demand

London ranks in fourth place behind second place Manchester and third place Edinburgh. In some cases, London does outperform Oxford. For example, property prices have increased faster at 5.5% a year on average over the past decade (compared to 4.8% in Oxford). However, despite strong rental prices (at £630 per room per month); very high property prices in London (£617,238 on average) means annual rental yields are very low for a new buy-to-let purchase at only 3.0%.

Southern England dominates for long-term investment

Seven of the top ten cities for landlords are in southern England. Both Bristol and Oxford fare particularly well for long term returns, with an average 4.8% increase in property prices. Brighton scores well for rent, yielding an average of £507 per room. The city also has one of the largest market sizes across the UK, with a staggering 28% of inhabitants privately renting. Milton Keynes ranks poorly for short-term yield, at 4.3%; one of the lowest in the City Tracker combined with the small private rental market in the top 10 (only 17% of residents privately rent here). However, there is still a demand for properties here, with only 1.8% of properties lying vacant.

Yorkshire struggles across the board

Yorkshire appears to be an unappealing region to invest in for buy-to-let, with three cities in the county in the bottom six. Sheffield has one of the lowest rental prices (£324 per room per month), and is not a good short-term investment, with a below average yield of just 5.3%. Bradford meanwhile suffers with poor price rises (only 1.6% per year) and a high number of property vacancies (4.1%). However, Hull ranks at 12th on the list, boosted by the highest short-term yield of all 25 cities (9.3%).

Midlands has a varied market

Nottingham ranks 7th on our list offering a very strong short-term yield at 7.3% and the market size is also impressive (24% are private renters), just behind London (25%). On the other end of the spectrum, Wolverhampton sits at the bottom. The city has the smallest rental market (only 12% of residents privately rent). As a result, vacancies are above average (at 3.1% of properties) suggesting that landlords might struggle to always fill their properties.

Damian Thompson, Director of Mortgages, Aldermore comments:

“Aldermore’s Buy to Let City Tracker shows there are still great short and long-term investment opportunities for landlords. The number of people renting in the UK has been rapidly growing, up 1.7 million in ten years², so private landlords are an increasingly central part of the housing market as supporting a robust and strong Private Rented Sector becomes more essential.

“The UK housing market has never been a singular thing, instead made up of multiple smaller markets with their own unique conditions and challenges. There have been numerous regulatory changes recently and persistent economic uncertainty but this affects every region differently. Going forward, landlords will need continual backing and advice from lenders and the wider industry so they can provide choice, diversity of tenure and quality properties for renters.”

What the industry is saying about the Top 5 cities

Number one: Oxford

Darren Meehan, Director, Bright Money Independent Mortgage Brokers, said:

“Oxford has always had a strong demand for rental properties, due to Oxford Brookes University, The University of Oxford and the many hospitals. The level of professional renters is attractive due to the low voids for owners, long tenancies that professionals take, and the properties tend to be well looked after.

“With the large volumes of new housing stock being built all over Oxfordshire, such as Didcot, there are a lot of new opportunities for investors. These new-builds outside the City Centre are more affordable to investors and they also target the commuters, so Oxfordshire really does have something for all budgets.”

Number Two: Manchester

Richard Ignatowicz, Director, Mortgage Savers, said:

“Manchester is currently regarded as one of the top BTL hotspots in the UK - it was primarily put on the investment radar due to the BBC moving to Media City in Salford Quays. This attracted a flood of southern and international investors and resulted in Article 4 being imposed in November 2018³.

“Having recognised the excellent returns, investors are now seeing other parts of Manchester experiencing a ripple effect, such as Ashton and Oldham, which are served by the Metro and within easy commuting distance to the City centre. HMO conversions are especially popular and currently providing double digit returns.”

Number three: Edinburgh:

Randal McLister, Head of Mortgage Services, Condies Accountants & Advisors, said:

“Edinburgh's buy to let market has and will continue to be strong due to the diverse nature of the city. As a landlord you have the ability to either single out a particular tenant base or diversify depending on the season (or the properties you have in your portfolio). The three main tenant bases are made up of the people that call Edinburgh home, the ever growing student population, and the year round festival goers. All three yield well for landlords and this alongside strong capital growth makes investment property in Edinburgh very attractive and why there has been so much inward investment here in recent years.”

Number four: London

Andrew Montlake, Managing Director of Coreco, comments:

“Despite the political landlord bashing that has been going on recently and the associated tax changes that many landlords have been struggling to get their heads round, the death of the Buy to Let landlord has been much exaggerated.

“Even in London, where yields are lower than other areas of the country, demand for rental property continues to make letting a property an attractive prospect for many landlords. The key is to make sure you first obtain independent tax advice to fully understand the changes that have occurred in the market and to help make a decision whether it is best to purchase in personal names or within a limited company.

“The appeal of London as an area to live and work has not changed despite the threat of Brexit and its relatively high prices. Companies have continued to invest in the capital, such as Apple making Battersea Power Station its HQ, and it is still a thriving centre for finance and technology. Foreigners continue to see London as a great area to both invest, especially given the relative weakness of Sterling, and as a place to educate their children.

“In fact, in a post-Brexit world it looks as though London will continue to draw people in with no sign of its magnetic effect diminishing, and all these people need places to live and to rent. The future of landlords in London may look slightly different, with landlords having to work harder to attract the best tenants, but it still looks very rosy.”

Number five: Norwich

Jorden Abbs, sales director at CommercialTrust.co.uk, said:

“Norwich is a strong commercial and educational centre and it is an hour and a half from London on the train. The city is surrounded by countryside and the beach is also just 40 minutes’ drive away.

“Norwich offers landlords a full breadth of property investment options. Student lets serve the University of East Anglia and Norwich University of the Arts, city centre HMO’s target young professionals, standard buy to let covers a full spectrum from family homes to luxury apartments, and with so much in and around the city, holiday lets also enjoy year-round appeal.

“Commercial property investment offers similarly diverse opportunities to residential. Finance, business services, science, manufacturing, agriculture, energy, engineering, digital and IT are all thriving industries in and around Norwich. As a result, whether you are entering the buy to let market for the first time, or building upon an established portfolio, it is possible to find a property to fit.”

-ENDS-

Notes to editors

¹ Aldermore’s Buy-to-Let City Tracker was designed by Opinium and comprises of five core indicators: average rent per room per month, short-term yield for a new buy-to-let purchase, average property price rise over the last 10 years, proportion of vacant properties in the city and size of the private rental market. The index uses a series of secondary data sources including the ONS, Census and other official housing statistics.

² Based on the latest Office of National Statistics (ONS) data showing the number of households in the private rented sector in the UK increased from 2.8 million in 2007 to 4.5 million in 2017, an increase of 1.7 million (63%) households. Source: https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukprivaterentedsector/2018

³ A new rule introduced in November 2018 requiring small family dwellings that were to be turned into HMOs for students or professional to rent together, would require the council’s planning permission. This affects the central Salford boroughs of Broughton, Claremont, Irwell Riverside, Kersal, Ordsall, Langworthy, Weaste and Seedley and the wards of Barton and Eccles.

Following a debate last year it was decided that small family dwellings that were to be turned into HMOs for students or professional to rent together, would now require the council’s planning permission

For further information, journalists can contact:

Gareth Hill, Aldermore
Phone: 07721 127514 Email: Gareth.hill@aldermore.co.uk

Laura Cronin, Lansons
Phone: 020 7294 3607 Email: laurac@lansons.com

For further information about Aldermore, please review our Notes to Editors page.

Published:09/12/19

Oxford tops the list for buy to let investment as hidden gems revealed across the UK

Aldermore’s Buy to Let City Tracker rankings table

What the industry is saying about the Top 5 cities