Aldermore's latest research on buy-to-let investment in UK cities also revealed that, despite its high rental prices, London saw a sharp decline in its ranking among the best cities for landlords to invest in.
Aldermore’s Buy to Let City Tracker has named Manchester as the best city for landlords to invest in with Glasgow, Coventry, Wigan and Bristol making up the rest of the top five.
The Tracker analyses five key indicators that impact buy-to-let desirability: average total rent, the best short-term returns through yield, long-term return through house price growth over the past decade, the lowest number of vacancies as a proportion of total housing stock, and the percentage of the city’s population in the rental market.
Manchester wrestles back crown as best city for buy to let investors
With the best long-term property price rises of all the cities (6.5% annual growth), Manchester offers the prospect of significant appreciation with landlords benefiting not only from rental income but also from the rising value of their investment over time.
Manchester also has a healthy market of tenants, with 32% of locals being private renters compared to the national average of 23%.
Wigan flies high whilst London takes a dive
A surprise this year comes from Wigan, which has jumped to 4th place up from 25th the year before. This was due to the city having one of the lowest proportions of vacant properties (0.6%), driving annual property price growth over the last decade (5.4%). This makes it a safer bet for landlords, even if the total return is lower.
In comparison, London dropped to 32nd place from 5th in 2023. Although average rents are still some of the highest across the country (£800), short term returns on rental yields (4%) and comparatively poor house-price growth (3%) are the main factors dragging the capital down.
Buy-to-let continues to offer landlords opportunities
The Buy to Let City Index suggests that the rental market continues to provide a good investment for landlords. The average rent per room increased by 18% from last year (£455 in 2023 vs £518 in 2024) and rental yields surged from 5.5% in 2023 to 6.9% in 2024 providing a good return on investment.
Research by Aldermore found that there is more optimism among landlords compared to the year before, with only 31% considering leaving the sector today, compared to 48% last year. Reassuringly, 58% say the value of their properties has increased in the past twelve months.
Wales continues to struggle
Wales continues to be less appealing for landlords to invest in, with Newport and Swansea once again appearing at the bottom of the table (49th and 50th respectively). However, there have been signs of improvement year on year with the average rental yield on a property in Swansea increasing from 4.7% in 2023 to 6.3% in 2024, whilst annual property price growth increased from 4.1% in 2023 to 4.3% in 2024.
“We’ve seen a lot of movement within the Index this year, which is reflective of significant shifts in the rental market," explained Jon Cooper, director of mortgages at Aldermore, "Landlords continuously need to be on the ball, as difficult as that can be, reviewing their portfolios and ensuring they’re getting the most out of their investments. There are still good returns to be made in many cities, with rental income staying steady from last year and demand remaining strong with an average of ten applicants competing for each property.
He added, "Landlords are seeing increased regulatory demands alongside shifting tenant expectations, posing a unique set of challenges. This requires them to adapt swiftly to maintain their portfolios, at the same time as continuing to offer a good standard of rental accommodation for a wide variety of tenants.
“However, with challenge comes opportunity. The current market environment presents a chance for landlords to rethink their strategies and work with their brokers to adapt and build resilience for the future."