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Which are the best cities for investing in buy-to-let?

Alex Johnson

892e499b6861819bed30bf00b7507bd752d4e933 300x200 Which are the best cities for investing in buy to let?With rental yields of 7.82%, Southampton has been named the best place in the UK for buy-to-let (BTL) investors.

Of the 50 towns and cities with the highest concentration of private rental housing stock analysed by HSBC, Southampton topped the list for rental yield due to relatively affordable housing and an average rent of £901 per month. Blackpool, Hull, Manchester and Nottingham make up the rest of the top 5, offering returns for BTL investors of 7.81%, 7.77%, 7.60% and 7.55% respectively.

Top 10 BTL Hotspots

Location Average Property Price Average Rent (Monthly) Rental Yield (gross)
  • 1. Southampton
£138,311 £901 7.82%
  • 2. Blackpool
£75,943 £494 7.81%
  • 3. Kingston upon Hull
£69,519 £450 7.77%
  • 4. Manchester
£102,631 £650 7.60%
  • 5. Nottingham
£83,313 £524 7.55%
£104,970 £624 7.13%
£171,581 £975 6.82%
£244,893 £1,375 6.74%
£91,012 £498 6.57%
£141,971 £775 6.55%

Partly due to holiday rentals and seasonal work, many seaside towns are BTL hotspots with 17 of the top 50 areas found on the coast. Blackpool tops the seaside town list with a yield of 7.81%. The rest of the top ten is made up of southern seaside areas, including holiday destinations such as Brighton, Bournemouth and Eastbourne. While property prices tend to be higher in these areas, rents are also above average, so yields are strong for investors.

Top 10 Seaside BTL Hotspots

Location Average Property Price Average Rent (Monthly) Rental Yield (gross)
  • 1. Blackpool
£75,943 £494 7.81%
  • 2. Bournemouth
£170,493 £825 5.81%
  • 3. Brighton and Hove
£229,622 £1,049 5.48%
£139,168 £598 5.16%
£152,171 £650 5.13%
  • 6. Shepway
£181,399 £695 4.60%
  • 7. Eastbourne
£177,408 £675 4.57%
£180,227 £654 4.35%
£177,408 £550 3.72%
  • 10. Thanet
£181,399 £524 3.47%

Because of its high property prices, London’s rental yields are relatively modest on the whole. Southwark tops the list of boroughs with a yield of 6.15%. Areas in Outer London offer some of the strongest yields in the capital including Newham, Enfield, Brent and Kingston upon Thames. Just three of the top ten areas are in inner London and each of these is in the East of the city, traditionally the more affordable end of the capital.

Top 10 London BTL Hotspots

Location Average Property Price Average Rent (Monthly) Rental Yield (gross)
  • 1. Southwark
£401,405 £2,058 6.15%
  • 2. Newham
£229,141 £1,126 5.90%
  • 3. Enfield
£261,163 £1,200 5.51%
  • 4. Brent
£337,723 £1,517 5.39%
  • 5. Kingston upon Thames
£333,122 £1,363 4.91%
£285,927 £1,148 4.82%
£428,987 £1,694 4.74%
£283,031 £1,101 4.67%
£364,296 £1,387 4.57%
£306,381 £1,148 4.50%

“Buy to let remains a good investment for those looking for above average returns,” said Peter Dockar, head of mortgages at HSBC. “Twenty-three of the top 50 areas offer yields above 5%, significantly more than is available from more traditional savings options. However, it is clear there is a fine line between a property in a desirable area, the rents that can be achieved and the returns that can be yielded so it is key landlords do their research as often the most popular locations may not offer the best return.”

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