Oxford is the best city for BTL investors

Author: Rent Guarantor

08/01/2020

If you’re among the Buy-to-Let investors who are seeking to grow their portfolio of UK rental properties, you might be interested to know that new research suggests Oxford could be the best location for your plans. When comparing the rental market across the UK’s various cities, a combination of key performance indicators point to the southern city as delivering the best yield and longer-term returns for Private Rental Sector (PRS) investors.

Data from mortgage lender Aldermore tracks the rental market in cities across the UK.  While Oxford is in top spot, London was also ranked up high at fourth pace. The continued strong performance of the rental market in those two cities has helped ensure southern England remains the region of choice for tenants, giving landlords with properties in that part of the country the best opportunity to reap the biggest and most reliable rewards.

Why Oxford?

Aldermore’s City Tracker index shows that Oxford tops the chart with an overall score of 74. That is based on:

  • The size of the private sector rental market.
  • Vacancy rates.
  • Long-term rental yields.
  • Overall rental ability.
  • Security in investment/possible capital gains.

The average achievable rent in the city of Oxford is £596 per month, where 28% of inhabitants rent from the PRS and the vacancy levels are low. Of course, no investment is perfect and for Oxford, the only shortcoming identified by this latest report is potential short-term rental yields. However, a 4.8% rise in property prices in the past 12 months helps to alleviate concerns arising from that detail.

Next in the list are Manchester and Edinburgh with an overall index score of 72. London follows at 71. The following cities make up the top 10:

  • Norwich 66
  • Bristol 64
  • Nottingham 63
  • Cambridge 63
  • Brighton 60
  • Milton Keynes 55

In the list of the top 25 most attractive cities for BTL investors across the UK, the bottom 5 are:

  • Wolverhampton 25
  • Newcastle 26
  • Bradford 29
  • Sheffield 30
  • Derby 31

With two cities on the bottom 25, Yorkshire is currently the least attractive region for BTL investors, at least on a nationally comparable basis. However, it’s important to note that’s not necessarily the case for investors who know the market well and invest wisely, with local knowledge and needs in mind.

“Aldermore’s Buy to Let City Tracker shows there are still great short and long-term investment opportunities for landlords,” said Aldermore’s Director of Mortgages, Damian Thompson. “The number of people renting in the UK has been rapidly growing, up 1.7 million in ten years, so private landlords are an increasingly central part of the housing market as supporting a robust and strong Private Rented Sector becomes more essential.“

2020 UK rental market outlook

Looking ahead to the UK’s rental market in 2020, a mixture of developments makes it difficult to see if landlords will be willing to grow their portfolios.

While the number of tenants is expected to rise, which will likely push average rents higher in most regions, concerns over the increased regulatory burden and taxes mean that won’t necessarily easily translate into higher yields and returns.

However, with a number of surveys suggesting landlords are considering exiting the market in 2020 and beyond, it’s likely that those investors and landlords who do remain in the market and even invest in more properties will benefit as they can enjoy higher rents from the army of tenants up-and-down the country.