Best buy-to-let areas in the UK for 2018

Landlords looking for the UK’s best buy-to-let areas in 2018 should consider Manchester and mark the Midlands as an area to watch, while commuter towns around London remain some of the best buy-to-let locations.

LendInvest’s latest buy-to-let index is out, and it makes great reading for landlords looking for the best buy-to-let areas.

  • Manchester is currently the best place to buy-to-let in England and Wales. It ranked highest for rental yields (5.55 per cent) and rental price growth (5.76 per cent). Manchester took the top spot after a steady climb up LendInvest’s rankings throughout 2017.

  • Colchester in Essex and Luton in Bedfordshire are in second and third position, with rental yields of over 3.78 per cent. Colchester has the strongest capital gains of all postcode areas over the last 12 months, while Luton remains a popular commuter town within easy reach of London.

  • The Midlands is still the buy-to-let location to watch, though – Leicester rose an incredible 17 places to reach ninth place in December’s index, while Birmingham narrowly missed out on the top 10, coming in at 11th.

Where are the best buy-to-let areas?

The buy-to-let index is compiled using data from the Land Registry and Zoopla, and ranks English and Welsh postcodes based on the key metrics of rental yield, capital gains, rental price growth and transaction volume growth.

To calculate rental yield, the annual rent received on a property is taken as a percentage of its market price.

While commuter belt towns remain some of the best places to buy-to-let (Luton, Rochester, Southend-on-sea and Romford are all in the top 10), markets in the East of England have enjoyed prominent rental price growth, with Norwich joining Ipswich in the top 10 for the first time.

LendInvest has singled out the Midlands as the buy-to-let area to pay most attention to. Leicester is in at nine, and while just outside the list at 11, Birmingham has climbed the index due to a strong rental market driving an attractive yield.

Birmingham benefits from a huge professional service sector (creating a substantial tenant pool), the forthcoming HS2 rail line that will speed up train times into London, and significant regeneration in the city.

Hull deserves a special mention as the biggest climber of 2017 – after finding itself in 99th place at the end of 2016, Hull ascended to number six in the latest report.

According to the research, here are the 10 best buy-to-let areas 2018:

  1. Manchester
  2. Colchester
  3. Luton
  4. Rochester
  5. Southend-on-sea
  6. Hull
  7. Romford
  8. Norwich
  9. Leicester
  10. Ipswich

Best buy-to-let areas for capital gains

Along with a high annual rental yield, property investors will also want to make a profit on their property when they come to sell.

While Colchester leads in this report with capital gains of 11.96 per cent, it’s London’s boroughs and towns that do particularly well. Southall, Harrow, and Ilford all have capital gains of 11.09, 9.89, and 8.82 per cent, respectively.

Top 10 areas for capital gains in the UK

Area Capital gains
Colchester 11.96%
Southall 11.09%
Hemel Hempstead 10.27%
Slough 10.19%
Harrow 9.89%
Ipswich 9.44%
Luton 9.16%
Southend-on-sea 9.12%
Ilford 8.82%
Hull 8.46%

Best buy-to-let areas for rental price growth

Leicester and Birmingham perform strongly for the Midlands here, coming in at the second and eighth best buy-to-let areas for rental price growth respectively.

But Wales also gets a look in on this table, with Cardiff and Swansea great choices for rental price growth too.

Top 10 areas for rental price increase in the UK

Area Rental price increase
Manchester 5.76%
Leicester 5.30%
Luton 5.26%
Rochester 5.12%
Cardiff 5.00%
Brighton 4.61%
Swansea 4.47%
Birmingham 4.29%
Newcastle Upon Tyne 4.18%
Truro 4.13%

Best buy-to-let areas in Scotland

But what about the best buy-to-let areas in Scotland? In 2017, we reported that Scotland could be the next buy-to-let hotspot.

Research from Totally Money also considers Scotland. Totally Money’s research looks at postcodes with more than 30 properties for sale and more than 30 properties available to rent, and because of that, many postcodes in Scotland didn’t make the cut.

But where the data is available, we can glean which areas make for the best buy-to-let areas in Scotland.

  • Glasgow’s G3 postcode makes it into the top 25 UK buy-to-let yields, at 23. The yield is 7.36%
  • Aberdeen’s AB11 postcode is in the top 25 UK buy-to-let yields just behind Glasgow, at 24. The yield is 7.30%
  • Paisley’s PA1 postcode is an affordable buy-to-let area and has high yields. The average asking price is £92,000 and there are yields of 6% to be had

Best buy-to-let areas 2018 – a rental heat map

Looking for a quick snapshot of the best buy-to-rent areas in the UK? Take a glance at the buy-to-let heat map below for an easy overview.

From Manchester, rated as the best area to buy-to-let, to Durham – rated 105th, and last on LendInvest’s BTL rank – here’s where to buy property for rental.

Best buy-to-let areas 2018 – a rental heat map

Image source: LendInvest

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