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Buy-to-Let hotspots revealed

Posted on 2015-08-18

Landlords who want to expand their property portfolio will always be on the lookout for the next best investment location. It can sometimes be difficult, however, to cut through the hype and buzz.

With this in mind, we've compared some of our own stats with two buy-to-let hotspot reports recently released to see which areas come up time and again.

An area can be identified as a buy-to-let hotspot if it has a significantly increased number of tenancies, yields which are higher than the national average or demand for rental property which heavily outweighs supply. All the areas detailed below incorporate one or more of these criteria.


The city in the heart of the Midlands performed strongly in our data and in figures recently produced by Barclays Mortgages. We calculate that the city is one of the top locations for retaining tenants in the UK.

In 2014/2015, 97% of new tenancies were signed by people moving within the city. In other words, most tenants that live here seem more than happy to stay. The current average monthly rent of £664 (for the 12 months to June) represents a 14% increase when compared to 2007/2008 figures.

Barclays reports that it completed the second most buy-to-let transactions in Birmingham during the first half of the year. The city is up to second in the Bank's ranking of buy-to-let activity after coming seventh in 2014.


It's no surprise to see this desirable seaside location perform well across the board. According to HSBC's hotspot report, which was released in May, Brighton is the 17th best location to invest in the UK with an average yield of 5.63%.

Last month, we calculated the average monthly rent in the area to be £979 (for the 12 months to June), a 25% rise when compared with 2007/2008. What's more, 24% of tenancies signed in 2014/2015 were by people moving to the area for the first time.

Brighton is able to sustain such a healthy property market due to its location next to the sea and proximity to London. Its prospects as a buy-to-let destination are enhanced by the presence of two universities which means tenant demand is often high.


The hot property market in the biggest city in the South West has been well-documented for a while now.

And Bristol's buy-to-let credentials are also strong. Similarly to Birmingham, Bristol is retaining its tenants for the long-term, something that many landlords aspire to achieve. In 2014/2015, 95% of new tenancies were signed by people moving from one Bristol location to another.

On top of this, last month's average monthly rent of £806 (for the 12 months to June) represents a 16% increase in the past seven years.

Another city which benefits from two universities and a workforce of young renting professionals, Bristol is the location which recorded the third highest number of buy-to-let mortgage transactions in the first half of 2015, according to Barclays. Landlords seem to be flocking to the area to take advantage of high tenant demand and impressive yields, which are being achieved thanks to average house prices increasing by almost 15% in the past three years alone (Zoopla).


Coventry has performed admirably for its landlords in recent times - this small city is another area which is attracting high numbers of new tenants as the Private Rented Sector continues to grow in size.

Over a quarter (26%) of new tenancies signed in 2014/2015 were by people moving to the area, a 4% increase when compared to the same figure seven years ago.

Average monthly rents have also increased significantly during this period; by 21% to a healthy £722. HSBC identifies the area as having the fifth best average yield in the country at 7.20%, an increase of over 1% in the past year alone.

The lower cost of buying a property is helping to keep these yields high, with average prices in Coventry well below the national average. The future for Coventry certainly looks bright as it is fast becoming one of the Midlands' go-to property investment locations.


The capital's rental market is so large that it performs strongly in the majority of industry reports and the picture is no different in the data sets we have looked at.

The average rent in Greater London for the 12 months to June was £1,450, a huge increase of over 50% when compared with 2007/2008. The rapid growth in the capital is clear to see, then, but the area is also strong when it comes to attracting new tenants. In 2014/2015, 18% of new tenancies in Greater London were signed by entrants relocating to the area, our data reveals. 

Consolidating the above, Barclays calculates in the first half of this year London was the location where it recorded the most buy-to-let mortgage transactions as the capital retained its top spot in the bank's hotspot ranking.

Meanwhile, HSBC ranks Newham as the 20th best area in the country when it comes to average yields. The bank calculates that landlords can earn an average of 5.20% by renting to tenants in the East London borough. London will always perform well for landlords due to its appeal as one of the globe's leading cities. That said, picking out the right location is key as exceptionally high house prices can distort yields in some areas.


East Midlands city Nottingham, like London, came up in all three studies. Our figures show that tenants who live here are keen to stay as exactly a fifth of all new tenancies signed in Nottingham during 2014/2015 were by tenants moving across the city.

Our figures also show steady rental growth here as the average monthly rent of £575 (for the 12 months to June) recorded last month represents an 11% rise in the past seven years. Barclays ranks Nottingham as the location with the fourth highest number of buy-to-let transactions in the first half of this year and HSBC says landlords can expect the seventh best average yield in the country here (7.04%).

Another city with two universities and great transport links, Nottingham's status as a buy-to-let hotspot looks assured for the foreseeable future.

The best of the rest...

There were a number of areas which recorded positive figures across the three studies. Manchester is HSBC's top buy-to-let hotspot for this year.

Over a quarter of the housing stock in the North West's biggest city is privately rented, HSBC calculates, while an average rent of £719and average property price of £108, 870 combine to create a healthy average yield of 7.98%. Manchester is also ranked highly (5th) in Barclays' report.

Meanwhile, Southampton has been ranked as the 7th best place to buy a rental property by HSBC with an average yield of 7.13% and Barclays says it was the area in which the 8th most buy-to-let mortgages were completed in the first half of 2015.

Another area which fared well is Reading in Berkshire, which was ranked by Barclays as the sixth best area in the UK for property investment, predominantly due to its high average monthly rent of £1,169.

Moving up North, two areas in Yorkshire are often cited as buy-to-let hotspots. In the first half of last year, Barclays ranked Leeds as the 47th best location for investment. In the first half of 2015, the city has shot up to number seven in the rankings, with an average rent of just over £700 a month.

Nearby Wakefield is the top location for attracting tenants who are new to the area, according to our data. We calculate that in 2014/2015, 28% of new tenancies were signed by people moving to the area.

You can view our most recent Rental Index – the most up-to-date picture of the UK rental market - in full here.

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