Landlords are increasingly shunning London and other southern English towns and cities to invest in the midlands and north of England.
Last year, portfolio landlords – those with four or more properties, flocked into cities such as Manchester, Birmingham and Nottingham, according to analysis by buy-to-let mortgage lender, Paragon Bank.
It revealed the top 10 most popular buy-to-let postcodes of 2023 with only one located in the southern region of England.
Buy-to-let hotspots: Paragon Bank revealed the top 10 locations for investment by portfolio buy-to-let landlords, those with four or more properties
Richard Rowntree, managing director at Paragon Bank, said: ‘Our data shows that portfolio landlords have a strategy of targeting major towns and cities across England and Wales, from Brighton and Hove on the south coast, up through the midlands and Wales and onto Newcastle.
‘Something that links many of these diverse areas is their proximity to universities or large employers, such as the NHS or manufacturing and distribution hubs.’
What locations are portfolio landlords targeting?
Manchester’s M14 postcode was the most popular location for buy-to-let landlords to invest in, according to Paragon Bank.
The M14 postcode covers south Manchester’s Fallowfield, Ladybarn and Rusholme districts and is located between the University of Manchester and Manchester Metropolitan University.
Landlords are attracted to the area by the high student population, according to Paragon, alongside the abundance of restaurant and nightlife options, including Rusholme’s famed curry mile.
The postcode also has a number of green spaces and is linked by a metro system alongside road and rail infrastructure.
Those investing in the are area able to achieve gross rental yields of up to 7.5 per cent, Paragon said.
The gross rental yield is the percentage of return an investor can expect to make back on the purchase price each year before tax and other costs are taken into account.
For example, a 5 per cent gross yield on a £200,000 property would amount to £10,000 per year in rental income.
Manchester’s M14 postcode was the most popular location for buy-to-let landlords to invest in
Jason Watkin, chief executive of the Manchester estate agent Lomond, says: ‘The M14 postcode has been a historically popular one for buy-to-let investment due to the fact that it’s perfectly positioned between two of the city’s major universities and it continues to be a strong area of focus for today’s investors.
‘Like most university cities, Manchester simply doesn’t have a sufficient level of purpose built student accommodation to facilitate its growing student population and so many students remain heavily reliant on buy-to-let properties.
‘This high level of demand, coupled with low void periods and the high returns on offer, provide a very attractive proposition for today’s investors.’
Lisa Stephenson, regional director at estate and letting agent Entwistle Green adds: ‘The buy to let market in Manchester is as strong as it’s ever been. Rents are at an all-time high and demand from tenants has risen to record levels.
‘Following a downturn in the sales market due to high interest rates, this has presented a unique opportunity for potential investors to maximise rental yields and build a strong income from their property portfolio, and we’ve seen a clear increase in landlords investing here over the last few months.’
‘Post-covid, more and more tenants are moving to the city from all parts of the globe.
‘A mixture of UK and international students who come to study at the multiple university sites across the city, combined with workers from Europe coming to work in the city’s thriving bar and restaurant scene, as well as the growing presence of big businesses moving to Manchester has resulted in a surplus of tenants and a shift in supply versus demand that is heavily in the favour of any potential landlord.’
The B29 postcode in Birmingham was the second most popular area for portfolio landlords last year.
The B29 postcode primarily covers the Selly Oak district, stretching across to Edgbaston in the east of the city and Shenley Fields in the west.
Again, this area is home to a sizable student population due to its location near the University of Birmingham.
Close by in neighbouring Edgbaston is the Queen Elizabeth Hospital, a notable local employer as one of the UK’s largest single-site hospitals.
Properties in the postcode are the most expensive on the list, with an average purchase price of £573,116.
While some parts of the postcode and surrounding areas can be considered affluent, it is also likely that the sizable proportion of large houses, which are well suited to shared living, contributes to these higher than average property values.
Yields of up to 6.9 per cent can be generated in the B29 postcode, according to Paragon.
The B29 postcode was the second most popular area for portfolio landlords last year
Richard Crathorne, chief executive of Birmingham lettings and estate agent, John Shepherd says: ‘While the University of Birmingham and a strong level of student rental demand is one factor pulling Birmingham’s buy-to-let investors towards the B29 postcode, it’s not the only reason the area is popular.
‘The close proximity of the Queen Elizabeth Hospital also means that there is a high level of need for housing from professional tenants as the hospital is not only one of the largest in the UK but is also a significant local employer.
‘As a result, landlords not only benefit from some very strong returns when investing within the postcode, but they also have the luxury of choosing which tenant segment they wish to let to.’
Nathan Nock, lettings area director at Connells in the Midlands adds: ‘As ever, the Birmingham buy-to-let market remains busy with demand continuing to outstrip supply.
‘That said, applicant levels have reduced from the post pandemic peak and landlords are having to ensure their properties are priced correctly and presented in the best way.
‘Rents have risen significantly over the past two years and now that there is a little more certainty around mortgage rates, landlords are buying again, attracted by the impressive yields available.’
Durham’s DH1 continues the theme of thriving student markets and is the third most popular location to invest in
The third most popular buy-to-let hotspot for investors last year was DH1 in Durham where properties can deliver yields of up to 7.3 per cent.
Although differing from M14 in Manchester and Birmingham’s B29 due to the postcode covering both suburban and rural areas, DH1 does continue the theme of thriving student markets.
Durham University’s membership of the Russell Group of leading research-intensive UK universities and consistent ranking amongst the top 10 nationwide contributes to the postcode’s popularity amongst students.
James Needham, director at Alesco Property Investments says: ‘It’s a common market trend at the moment. Money is moving away from the capital in search of better returns.
‘This also aligns with massive jumps in rental prices across the UK where there is a significant lack of available rental property.’
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