Britain's top 50 buy-to-let hotspots revealed: The locations that could net you a windfall

There are still hotspots where property investors can weather the storm and beat Labour’s latest attack on landlords – as long as they choose their locations carefully.

Owners of rental properties has been stung by a nasty cocktail of ballooning mortgage rates, tax rises and seismic legislation changes.

But Anisha Beveridge, of Hamptons, says: ‘It’s a good opportunity for landlords to boost their portfolio.

‘Bigger investors are using this time to buy homes that smaller, accidental landlords are selling.’

Money Mail can today reveal the definitive ranking for buy-to-let hotspots.

Aldermore Bank, which compiled the research for Money Mail, has analysed 50 of the top cities across the country to find the places where investors could make a mint by snapping up a property – and the deadzones to avoid.

While it can be easy to fall in the trap of focusing on yield – the size of the annual income compared to the cost of buying the property – there are a host of other factors potential landlords should consider.

To form a definitive ranking, Aldermore combined five key metrics: average rent per room per month; short-term yield; average annual property price increases over the past decade; the proportion of homes that are vacant; and the size of the private rental market.

Manchester has been crowned the UK’s most attractive city for property investment for the second year in a row.

Yields in the northern powerhouse are decent at 7.2 per cent and the monthly rent per room is £592. That is above the national average of £556 per room.

But it’s the huge demand for rental properties that pushes the city into the top spot, experts says.

Jon Cooper, head of mortgages at Aldermore, says: ‘The retention of students after university is huge – and it has the biggest number of overseas students outside of London.

‘Big companies have opened offices here, too, such as Booking.com.’

Graduates and young professionals are the most likely demographic to rent. One in three Mancunians rents privately and just 0.8 per cent of properties are vacant, hinting at strong competition for available lets.

David Lewis, northwest partner for Garrington Property Finders, says that the city has seen swathes of attractive purpose-built blocks for tenants – such as skyscraper The Blade – pop up throughout the centre, which are ideal buys for yield hunters.

However, investors still seeking capital growth should consider a house in the suburbs, he says, as these will always be in demand and sell quicker than flats.

Jason Harris-Cohen, a portfolio landlord who runs house buying firm Open Property Group, says: ‘Northern and Midlands cities are leading the rankings with their strong local economies. It reinforces the ongoing shift towards more affordable, yield-driven markets.

‘Investors are clearly prioritising cash flow in northern regions as interest rates are forecast to stay higher for longer.’

As high interest rates eat away at landlords’ profits, maintaining a healthy yield is vital to meet monthly mortgage payments.

Borrowing costs are expected to stay inflated all year with as many as two base rate rises priced into by markets and the Labour government turmoil not helping.

This means that mortgage rates will remain high this year, which will put even more pressure on landlords’ margins if their yields aren’t strong.

Northern areas have historically seen sluggish capital growth but prices are now storming ahead of southern parts of the country. It means investors can currently get the ‘best of both worlds’, as Ms Beveridge puts it.

Manchester scores top for long term price growth with prices of homes sold rising by an annual average of 6.3 per cent over the past ten years – outpacing any other city.

Wigan and Liverpool also score highly due to impressive yields and house price growth. Wigan, for example, boasts yields of 9.3 per cent but capital growth of 5.4 per cent a year.

Hull has scored the best for yield across the 50 cities for the second year running, reflecting its reliable ability to provide short-term income.

Landlords in the city can expect an impressive 11.6 per cent yield – up from 10 per cent last year – thanks to cheap average property prices of just £130,121.

Average annual rent for a property is £15,144, which means investors can make their money back in eight and a half years.

Malcolm Davidson, a buy-to-let broker at Hull Moneyman, says: ‘It’s due to the affordability in the area – it’s much cheaper than somewhere like Leeds’.

Despite the strong yield, Hull ranks just 18th on our list. It is let down by a high number of vacant properties compared to other areas (1.7 per cent of properties are empty) and a lower house price growth, averaging just 4.1 per cent a year.

Following closely behind is Glasgow, which boasts a yield of 9.9 per cent.

Investors may also want to turn to Sunderland (9.8 per cent) and Dundee (9.5 per cent).

Yield chasers should avoid London, which is at the bottom of the pile at just 4.5 per cent.

Monthly rents per room are a robust £860 – or an average of £25,125 a year for a whole property – but sold property prices are sky high at £559,385. This means it will take buyers longer to make their money back.

Strong yields are vital in today’s high-interest rate market but landlords who only look at this measure could be in for a shock.

Aberdeen scores highly for short-term returns, at 9.7 per cent, but ranks as the worst city for buy-to-let investment, according to Aldermore.

Ms Beveridge explains: ‘This is because Aberdeen has seen house prices fall. The housing market is so tied to the oil industry there.’

It’s the only place on our rankings that has seen a plunge in the prices of homes sold, with an average fall of 3.9 per cent a year over the past decade.

The Scottish city was once seen as the hub for the European oil market, but it has seen a rapid decline over the past decade as the industry pivots towards renewable alternatives.

It means that residents have grappled with mass redundancies and a shrinking employment market that have in turn damaged house prices and demand for rental properties in the city.

Aberdeen has the largest number of vacant properties (4.5 per cent), creating an oversupply. Plus, only 17 per cent of the market privately rents, leaving landlords struggling to fill properties.

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