Article Summary

Manchester and Leeds have both been ranked in the top 10 places in the UK that are best to buy an investment property.

New research by agents Coulters has uncovered the top 10 areas of the UK with the best return on investment (ROI) for buy-to-let investors. And northern cities perform exceptionally well.

Northern cities dominate the top 10

In order to compile the list, Coulters took the average price of a property, worked out the likely mortgage repayments and compared that to the average monthly rental prices for the area and property type.

This allowed them to find the annual profits, which they converted into the percentage of the overall house cost to give the ROI.

Overwhelmingly, the research found that the north was the best place to buy an investment property in terms of ROI. Manchester and Leeds both came in the top 10, ahead of other investment hotspots like Newcastle (in 14th place), Liverpool (in 17th place) and Birmingham (in 19th place).

High annual profits

The research ranked Manchester as the 6th best place for landlords to achieve a positive ROI, while Leeds came in 8th.

On average, buy-to-let investors in Manchester can expect an ROI of 2.14% on their investment property, which equates to profits of £5,015 per annum.

The ROI for the average Leeds investment property sits at 1.9%, making profits of £4,339 per year for landlords.

In the top spot though, is the Greater Manchester city of Preston. The average buy-to-let property in this commuter town generates a fantastic ROI of 2.98%, or a £5,256 profit.

Growing rental demand

The likely reasons behind the large number of northern cities performing well are the low average property prices and ever-growing demand and undersupply of rental properties in these areas.

And although house prices in key northern cities like Leeds and Manchester are set to increase dramatically, so will the demand from tenants. This means the healthy rental yields property investors have enjoyed in these places shouldn’t slow down any time soon.

South performs poorly

On the other end of the scale, the south once again proved itself the worst place to buy an investment property in terms of ROI. The bottom 10 is mostly full of southern cities, such as Luton and Oxford with an average -0.15% ROI or respective losses of £441 and £865 per year. Even worse is Reading, with an average -0.32% ROI or losses of £1,231 per year.

The reason for the overrepresentation of southern cities in the bottom of the rankings is due to the high average property prices. This makes it difficult for landlords to make a profit.

Find out more

If you’d like to buy an investment property and want to learn more about the best places to invest, get in touch with North Property Group now.