UK house prices have reached a record high and, while the market hasn’t slowed down much since the end of initial Covid restrictions, general affordability means “Generation Rent” will remain that way for the foreseeable future.

However, the rise in prices and demand has been led by buy-to-let investments, with over 47,000 new buy-to-let property companies being incorporated in 2021. For those with money to invest, the property market has never been more popular. 

With increased popularity comes increased competition, meaning those looking to invest now have a much more challenging job than those in the later part of 2020. Therefore, potential buy-to-let landlords will need to do more planning before they make their investments.

Because of this, Property Inspect has analysed cities across the UK using a number of socioeconomic features to identify the most attractive places for investors and renters for confidence and security when investing in new properties.

The factors analysed for renter satisfaction were crime rates, green spaces and average salaries while the factors used for landlords were unemployment rates and estimated yields.

The UK’s most investable cities 

RankCityCrimes per 1,000 peopleGreen SpacesAverage EarningsUnemployment RateEstimated Yield
1Belfast10127£29,0003.60%4.46%
2Birmingham5055£30,0008.10%3.83%
3Cardiff8540£29,0004.90%3.87%
4Edinburgh5639£32,0003.90%2.21%
5Bristol9139£32,0004.60%3.43%
6York7336£28,0003.20%2.82%
7Bath6425£29,0003.10%2.63%
8Norwich9643£27,0004.80%4.52%
9Swansea7238£25,0004.60%4.47%
10Sheffield9054£30,0005.50%3.46%

Owing to its high yield and low unemployment rate, the study found that Belfast is one of the best cities in the UK to invest in. Average house prices in the area are £148,000, almost half the UK average of £274,000, meaning investors can enjoy decent rents with a lower initial investment.

The 10 most investable cities are highly varied, with few cities based in the same region. With data confirming that most landlords buy properties in their own region, this is encouraging news that investors across the country can benefit from highly investable locations.

UK cities with the highest rental yields

CityAverage House PriceAverage Rent P/AEstimated Yield
Norwich£172,540£7,8004.52%
Swansea£167,621£7,5004.47%
Belfast£148,036£6,6004.46%
Derry£143,826£6,1804.30%
Manchester£203,169£8,7004.28%
Stoke on Trent£120,043£5,1004.25%
Newcastle£177,821£7,1764.04%
Sunderland£126,520£5,1004.03%
Newport£199,843£7,8003.90%
Cardiff£224,555£8,7003.87%

(Data shows the estimated annual rent of a one-bedroom property in each city.)

Buy-to-let investors in Wales and Northern Ireland can enjoy some of the highest rental yields, while Norwich’s high rental cost compared with its property prices helped push it to the top of the leaderboard.

These cities are also considerably varied, meaning investors in most parts of the country can take advantage of higher yields when looking for properties to invest in.

Whether you’re investing for the first time or adding to your portfolio, the results of this study could be beneficial in understanding the current climate for renters and property owners and help you maximise your investment while also maintaining security.

Starting a buy-to-let business

Some buy-to-let investors may benefit from setting up their own limited property company to benefit from corporation tax over income tax. This will most likely help higher earners and those with several properties and comes with its own challenges but in the long run, it can reduce your tax bill.

Benefits of setting up a limited company

Landlords who own their property personally will pay a rate of 20% income tax on buy-to-let income between £12,571 and £50,270, with the rate increasing to 40% for income between £50,270 and £150,000 (and 45% above £150,000).

Conversely, the main corporation tax rate is 19%, only rising to 25% on profits over £250,000. If your property portfolio earns you more than £50,000 a year, it could be well worth establishing a limited company to manage your property and reduce your tax bill.

Limitations of limited companies

On the other hand, establishing a limited company takes a lot more steps than simply investing as an individual. You’ll need to register the company, name directors and provide information on your business activity. This will include filing returns and other admin jobs which, although they can be outsourced, can consume more time and money. 

While owning and managing property always comes with admin, like property inspections, repairs and tenant finds, it’s down to you how much more of this work you want to put on your plate.

Making your next investment

The property market has been consistently climbing since late 2020, with prices up 9.6% year-on-year in January 2022. This growth is expected to continue, meaning there’s no reason not to begin investing in property right now. Additionally, buy-to-let investment is a long game and higher initial equity means you’re more protected should growth slow down or reverse.

As with any investment, there are stakes to be considered and a lot of money to be invested. Before expanding or beginning your property portfolio, you might want to consult with a financial advisor to determine which course of action to take that will benefit you the most. 

Sources

  • House price, rent, crime and unemployment data sourced from ONS.
  • Salary data are taken from Payscale.
  • Data on green spaces have been taken from TripAdvisor.