Revealed! The best buy-to-let locations for 2020

Thinking of building a buy-to-let portfolio, or adding to your existing empire, in 2020? Royston Wild talks about the best locations to buy next year.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Thinking of buy-to-let investing but unsure where to look? Handily, SevenCapital has revealed what it says are the 10 most attractive places for investors in 2020. It comes as no surprise that the North of England dominates the list.

Top 10 Best Buy-To-Let Locations (alphabetical order)

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Town Average Property Price Price Growth Since 2014 Average Rental Yield
Birmingham £190,091 19.40% 4.92%
Cardiff £193,300 14% 4.89%
Leeds £169,247 17.04% 5.07%
Leicester £166,083 23.92% 5.16%
Liverpool £134,963 12.45% 5.82%
London £717,731 13.61% 4.85%
Manchester £229,129 22.09% 4.77%
Nottingham £160,522 19% 5.44%
Oxford £348,345 11% 4.25%
Sheffield £142,210 19.50% 5.87%

The property investment firm says “if you’re looking to achieve high rental yields in the UK, typically the further north you go, the higher the yield,” led by Liverpool and Sheffield, where average yields sit above 5.8%. SevenCapital even notes that yields in some parts of these cities can rise to between 7% and 8%.

Slick cities

So what makes them brilliant investment destinations? According to SevenCapital…

  • Regeneration is the story for Liverpool, with £14bn worth of projects in progress, or in the pipeline, creating a place packed with “exciting developments, exceptional career opportunities and rising tenant demand.”
  • Nottingham’s central location in the UK, terrific infrastructure and good social and shopping scene makes it a hit with professionals and students.
  • Cardiff is expected to be the fastest-growing British city over the next 20 years, helped by massive regeneration that has brought industries, such as the financial, creative, life science and manufacturing sectors, to life.
  • Brexit might be hampering the London market right now, but it’s expected to expand again once a deal is reached. Apparently “as one of the major financial destinations in the world, it’s nigh-on impossible for London to experience prolonged declines.”
  • Oxford is one of the strongest economies in the country, underpinned by its “exceptional employment opportunities and a world-famous education sector.”
  • One of the fastest-growing population in the UK — expanding at seven times the pace of London — makes Leeds an attractive place for buy-to-let investment.
  • Property prices in Sheffield are among the lowest in major British cities, allowing investors to ‘lock in’ stronger yields should forecasted growth transpire.
  • Chronic supply and demand issues” makes Leicester a top place for buy-to-let investors with plenty of regeneration projects coming to life.
  • Manchester is “one of the most exciting places to live and work in the UK” and is experiencing the same ripple effect as London has over the past decade, with growth spreading out from the city centre to areas such as Salford, Stockport and Bolton.
  • An exploding population means Birmingham should need 100,000+ homes over the next 10 years, and for 2020, rampant development ahead of the 2022 Commonwealth Games is expected.

Careful now

There’s plenty for both prospective and existing landlords to chew over for the year ahead then. But before taking the plunge, investors need to remember that a combination of soaring costs and rising tax liabilities have smashed returns for buy-to-let participants in recent years.

I still believe that those wanting to grab a slice of the property sector would be much better served, therefore, by buying stock in one of the country’s listed housebuilders. Why? A combination of booming dividend yields and some ultra-low earnings multiples at current share prices. It’s why I own shares in Taylor Wimpey and Barratt Developments.

There’s an abundance of other ways to play bricks-and-mortar investment, however. Owners of big logistics centres like Clipper Logistics and Warehouse REIT, firms that are great plays on e-commerce. Alternatively, firms like Empiric Student Property are great ways to play the booming student accommodation market. What’s great about these stocks is that they also offer up dividend yields north of 5%.

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Royston Wild owns shares of Barratt Developments and Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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