For many years, London has been the darling of the property investment market, providing high yields and booming tenant demand. However, with sky high property prices in the capital, investors are looking further afield for the opportunities.
New research from Savills has analysed the key drivers for the rental market and identified the top cities for buy-to-let investment. The top three positions go to Manchester, Reading and Bristol, because of their strong economic growth factors and reputation as vibrant, desirable places to live.
Though this is not an exhaustive list, Savills has highlighted investment prospects in cities set to experience a significant housing shortfall, such as Oxford. The research examined the economic prospects of each city, which included analysis of historic and future growth sectors.
The research also looked at the investment potential of each city, by taking into account the net income return, rental growth prospects and capital value growth; housing supply and demand in each city, including objectively assessed need, household projections, population growth forecasts and dwelling completions; and how the rental market has evolved and grown in
Top Ten Cities for Investment
• Milton Keynes
Peter Armistead of Armistead Property comments: “House prices in London are about five times what they are in Manchester, but salaries are only 30% higher. Manchester is a very affordable place to live and demand for property is soaring in the city, thanks to the expansion of the MetroLink tram system, the trendy Northern Quarter and the BBC Media City.
Manchester has vibrant restaurants, bars, clubs plus a great music scene, galleries and museums. It also has an amazing student community and its universities, teaching and research facilities are truly world class. It is home to nearly 100,000 students, making it one of the largest student cities in Europe. Despite all of its many advantages and attractions, Manchester is a very affordable place to live and many students chose to carry on living there after they graduate, as well as graduates from other areas moving to Manchester. Furthermore, wages relative to property costs are a very important factor in attracting these people.
Manchester is a great place for BTL investment. An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000. A property in the city can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper.
It’s not surprising that investors are turning away from London to more fruitful, regional cities like Manchester. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.”