Last year revealed potential Buy-To-Let (BTL) hotspots, as many areas benefited from long-term returns through housing price increases. Short-term rental yield returns were also boosted in some places. Year after year, the cities that offer the best investments have shifted. Investors must be on the lookout for the optimum chances for both short and long-term investment returns. Rather than focusing on a single location, diversifying your assets across several locations is the best bet. Following an exceptionally successful 2022, a few areas in the UK are poised to thrive in the BTL market. This article will concentrate on the top locations that are primed to lead the way in the BTL industry.
Due to its solid real estate market and high rental demand, Manchester is rated as the best city for buy-to-let investment in 2023. Currently, 31% of the city's residents rent privately, providing landlords with the advantage of short-term demand and filling their homes with tenants. Manchester has seen the second-fastest increase in monthly rental costs in the UK. According to Manchester Evening News, the average monthly rent has increased from £959 in Q3 2021 to £1,157 in 2022, a 20.5% increase. There is now a significant amount of competition for rental properties, indicating that demand for both investors and tenants plays a role in driving the rental market in Manchester.
Manchester property has historically had strong year-on-year growth, with house prices rising at a faster rate than anywhere else in the UK during the last two decades. Manchester property prices have risen from £48,845 in 2002 to £210,647 as of May 2022, according to the Buy Association. This represents a 331.26% increase in percentage. The development of regeneration projects and the addition of business sectors are adding to Manchester's commercial success while also increasing housing demand.
The most compelling attraction for investment prospects in Manchester is the rental yield. Currently, the average rental yields for Manchester postcode districts range between 6-7%. According to Property Data, the district with the greatest return is M14, which has an average of 10.2% and roughly 15 houses selling per month. According to Business Manchester, Manchester will grow 18.8% by 2026.
Coventry is a multicultural city with a young, expanding population. In the last ten years, the city has grown at an exponential rate, with a significant rate of population growth. Coventry is well-known for its skill in research and development. Coventry's economic strength is driving up demand for jobs in the city. According to Coventry Live, the UK Battery Industrialisation Centre (UKBIC) plans to open a site near Coventry Airport as a research and test manufacturing base, with the goal of creating more than 100 job opportunities.
The average house price in Coventry reached £234,707 in October 2022, this is a 12.6% increase of the house prices from a year ago according to Land Registry. Historically, Coventry has experienced significant house price growth as there has been a 214% increase in the past 20 years according to The Boar. The current average monthly rental price in Coventry is £1,213, which is over £500 higher than the average monthly rental price in September 2021, which was £724. Coventry's organic property growth is among the strongest in the entire UK, and when combined with the economic growth of the residential and commercial sectors, investors should consider investing in Coventry to capitalise on the ongoing growth; entering earlier will result in higher returns in the coming years as the city continues to develop.
Property demand in Cambridge is thriving due to the influx of business openings in the city. Microsoft, Amazon and Apple have all put down roots in Cambridge and opened up new recruitment opportunities. The effect of science and technology businesses gravitating towards the city has driven the property demand for job seekers, academic and professional talent. According to Bidwells, pharmaceutical and biologics company AstraZeneca, a pioneer of the COVID-19 vaccine, opened their new global R&D centre and corporate headquarters on the Cambridge Biomedical Campus in 2021.
Cambridge is renowned for its universities. The University of Cambridge has over 20,000 students, whereas Anglia Ruskin University has approximately 22,000 students. With so many students looking for housing, the rental market is brimming with potential tenants. Investors wishing to invest in Cambridge can benefit from this, as the consistent influx of students year after year should keep landlords' houses filled. Cambridge is extremely well connected for commuting; only 50 minutes by train from London, Cambridge residents who work in the capital will not have to worry about transportation.
The current monthly average for rent in Cambridge is £2,561. The current average house price is £547,677. While Cambridge is significantly more expensive than other areas in the UK, with the exception of London, the demand for housing from students and business professionals allows for houses to be filled quickly and tenancies to last for a long time due to the city's prestigious universities and technological and pharmaceutical opportunities. The strong job growth in knowledge-intensive companies in the scientific and technology sectors will continue to develop as the science-based economy expands, opening up new opportunities and driving up demand for real estate.
Milton Keynes is one of the cities that will benefit from rapid growth in 2022. According to Land Registry, the average house price has climbed by more than £50,000 in the last year. The average house price in September 2022 increased by 3.9% over the previous month to £336,018. Following these improvements, Milton Keynes is now ranked ninth in yearly growth among 64 local towns and cities in the South East of England. These advances have also benefited rental yields in Milton Keynes, where the average rental yield is 5%. MK9 is the district with the highest yield (8.4%).
The Milton Keynes economy is poised for substantial expansion as outside investments and the development of technology-based enterprises contribute to the area's overall economic growth. As a result, more job possibilities will become accessible, and property demand will continue to climb. The creation of a completely new innovation hub called 'The Shed' will be the most significant contributor to this. This is a 2.35-acre site where a mixed-use development with 288 apartments, shops, cafes, and other amenities will be built in a new tower block. The purpose of this development is to build a future-focused hub for innovators. With accessible rents and excellent technology, the plan is to attract entrepreneurs and innovators from a wide range of sectors.
2023 will be a pivotal year for these areas, as each is poised to outperform its performance in 2022 and prove to be some of the best investments for individuals. BTL investors can look to capitalise immediately by purchasing property early in the new year before price growth picks up.
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