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Mollie Millman
21 January 2021
Landlords looking for the UK’s best buy-to-let areas in 2021 should consider Manchester, but areas in the South East dominate the top 10.
Where are the best buy-to-let areas?
Manchester is ranked first on Aldermore Bank’s city tracker, which ranks the UK’s best areas for buy-to-let.
This list isn’t based only on the best rental yields, traditionally the most desirable aspect of buy-to-let.
Instead it takes into consideration a combination of five factors, including:
average total rent
the best short-term returns through yield
the best long-term return through house price growth during the past decade
the lowest number of vacancies as a proportion of total housing stock
percentage of the city population in the rental market
Here’s a snapshot of the results using these five factors:
Manchester is the best buy-to-let area for landlords, knocking Oxford off the top spot from the previous year, which now sits in fourth place
climbing up the ranks is Cambridge, which has jumped from eighth to second place in the past 12 months
London is also ranked in the top three, while hitting the top spot for average total rent
the highest yields are achieved in Hull, ranked in 14th place overall in the tracker
cities in Wales are among the worst buy-to-let areas according to the list of 50 locations, with Newport and Swansea sitting at the bottom
The best buy-to-let areas – complete list
Manchester is ranked top of Aldermore Bank’s list. Manchester’s main selling points for private landlords are that it performs well on core factors, such as rental returns and long-term house price growth.
It has one of the biggest rental markets in Britain, with 31 per cent of Manchester’s population being private renters.
It also has some of the lowest vacancy rates across any city included in the tracker.
This is combined with above-average rental rates – on average £428 per room a month – and a rise in property prices of 4.1 per cent every year on average during the past decade.
But despite a number of cities in the North ranking highly on the list, the South East remains the best region for buy-to-let, with four cities making the top 10. These include Oxford, Brighton, Reading, and Milton Keynes.
What’s more, Northampton, Swindon, and Reading are new entries into the top 10.
Here are the top 10 areas for buy-to-let:
The remaining cities in the top 25 best areas for buy-to-let are:
Edinburgh, Scotland (overall score: 62)
Luton, East (overall score: 62)
Peterborough, East (overall score: 60)
Hull, Yorkshire (overall score: 60)
Portsmouth, South East (overall score: 59)
Glasgow, Scotland (overall score: 58)
Southend, East (overall score: 57)
Plymouth, South West (overall score: 55)
Telford, West Midlands (overall score: 55)
Chelmsford, East (overall score: 54)
Norwich, East (overall score: 54)
Maidstone, South East (overall score: 54)
York, Yorkshire (overall score: 53)
Wigan, North West (overall score: 53)
Coventry, West Midlands (overall score: 52)
Where are the best rental yields in the UK?
According to Aldermore Bank, you can find some of the UK’s best rental yields in Yorkshire.
Hull (ranked 14th) has the best short-term rental yield of 9.2 per cent
Barnsley and Doncaster both have a rental yield of 7.9 per cent
but Wakefield (ranked 48th) has a low average room rental rate of £337 per room a month
Where are the worst areas for buy-to-let?
Cities in Wales struggle in Aldermore Bank’s rankings. While it only lists 50 areas, the bank says that Wales appears to be a less appealing region for landlords – Newport and Swansea sit in the bottom two.
While Swansea has the second lowest available rental returns (£324 per room a month), it does have a rental yield of 6 per cent. Average annual house price growth is only 1.5 per cent, which might not translate well to long-term returns.
Cardiff does place higher (27th), with rent returns of £418 per room and a short-term yield of 5.6 per cent.
Here are the bottom 10 areas in the list:
Basildon, East (overall score: 37)
Liverpool, North West (overall score: 37)
Dundee, Scotland (overall score: 36)
Sunderland, North East (overall score: 32)
Belfast, Northern Ireland (overall score: 32)
Sheffield, Yorkshire (overall score: 30)
Wolverhampton, West Midlands (overall score: 29)
Wakefield, Yorkshire (overall score: 28)
Newport, Wales (overall score: 24)
Swansea, Wales (overall score: 20)
Investment opportunities for landlords
Jon Cooper, head of mortgage distribution at Aldermore, said: “There has been a high level of uncertainty for landlords since the Covid-19 outbreak and they have had to continuously adapt to a raft of challenges.
“But with so many working from home right now, it reinforces the importance of a robust and diverse private rented sector.
“The changing needs of renters, whether to move to a new location or a different type of property to fit flexible working demands, has created investment opportunities for landlords.”