2023's buy-to-let hotspots: The cities to watch

Here is a list of the five cities that, in our opinion, landlords should look to invest in for 2023.

For this analysis, we looked at five crucial variables that have an impact on buy-to-let desirability.

The lowest number of vacancies as a percentage of the total housing stock, the proportion of the city's population who rents, the highest short-term returns through yield, the long-term returns through home price rise over the past ten years, and the average total rent are among them.

Manchester

The ideal long-term investment for investors in buy-to-let properties is Manchester. Manchester has reclaimed the top rank for the first time since 2020 as a result of the city's real estate market's long-term return increase.

The average price of a home has increased by 5.6% since 2020 and is currently ￡247,341. With 31% of the city's residents renting privately, it also has a strong rental market, giving landlords access to both short-term demand and the potential for a profitable sale of their property in the future.

Comparing Warrington, Liverpool, and Wigan to other North West cities, the average rent per room (￡454) is likewise expensive.

London

London moves up the rankings, moving from 6th to 2nd place, after declining over the previous few years. Despite the fact that shorter-term yields are still relatively low at 5.1%, the capital continues to offer the highest average room rent among all the locations in the survey.

In contrast to the national average of 21%, the demand for and size of the private rental sector remains strong at 29%.

Peterborough & Milton Keynes

Peterborough and Milton Keynes leap up the rankings - Peterborough and Milton Keynes have rocketed into the top 10, with Peterborough moving up the scoreboard 11 spots to take over the 5th spot and Milton Keynes moving up an amazing 28 spots to take over the 6th spot.

These cities are a desirable base for many commuters because more individuals are working from home with the implementation of COVID and new rail links are linking people across the nation.

With property price growth in Milton Keynes growing from 4.6% in 2021 to 5.6% in 2022 and in Peterborough from 3.86 to 5.2% over the same time period, the longer-term return prospects for these cities have increased significantly over the past year.

These cities have grown to be particularly appealing destinations for buy-to-let investors wishing to diversify their portfolios due to above-average rental values.

East Region

Opportunities in the East rate highly, although a number of important cities drop in the rankings - According to data, the East region has the highest percentage of cities in the Top 20 with seven. These cities included Chelmsford, Cambridge, Peterborough, Luton, Southend, Basildon, and Norwich. All of the locations provided appealing long-term returns, with Southend's average yearly gain in house price, at 5.9%, being the highest of the 50 cities examined.

Oxford unexpectedly fell from 2nd to 11th in just one year. The key contributing causes were a dip in rental income from ￡627 to ￡595 this year from the previous year, as well as reduced short-term yield and a decline in long-term return. In 2022, Leicester, Northampton, and Derby all experienced a decline in performance relative to how they compared to other cities the previous year in a number of different categories.

Conclusion

The cities providing the best investment for landlords have continually changed from year to year. This demonstrates how diligent landlords must be to make the most of their investment; they must search for locations that provide value both now and in the future.

Interest rate increases, the UK economy's uncertainties, stamp duty changes, and impending Energy Performance Certificate changes have all put pressure on both landlords and tenants in the mortgage market, causing both to experience a string of trying occurrences. We urge landlords to assess their portfolios with their brokers in order to make sure they are prepared for potential future shocks.

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