Abstract: Person holding property hotspot - where will the best rental yields be in 2020?

Large cities continue to enjoy above-average price growth thanks to rising demand and affordability, supported by low mortgage rates.

The pace of annual growth across cities is slowing compared with recent years, but Edinburgh, Leicester, Manchester and Birmingham have enjoyed cumulative house price growth of more than 15 per cent since 2017, according to Hometrack data.

In the short term, the outlook has been impacted by the start of the general election campaign, but after the Christmas slump and through until the end of March, demand for homes is expected to pick up again.

So where should landlords look in 2020 for the best property hotspots?

Birmingham

Birmingham continues to be a favourite for landlord investment. Strong demand and continued population growth mean Birmingham has the potential to continue to deliver good returns for the small-scale investor. Estate agents Knight Frank forecasts price rises of 12.5 per cent by 2022. With the average house costing £166,900 (according to Hometrack), Birmingham has achieved annual growth of 3.5 per cent over the past 12 months compared with average UK growth of 2.5 per cent. Since 2014, it has enjoyed growth of 19.4 per cent.

Nottingham

Thanks to its thriving city centre, Nottingham remains a solid choice for investors. Prices have risen by nearly 20 per cent since 2014, and growth is anticipated as the city continues to develop. Since 2014, prices have risen by 19 per cent – though the market is still relatively affordable, with the average house costing £156,600. There is strong demand among both students and professionals, and annual growth over the past 12 months reached 3.4 per cent.

Leicester

Another Midlands city that is also enjoying a mini boom thanks in part to undersupply and growing demand. House prices in the city have managed a growth rate of 4.7 per cent over the past 12 months, but the figure stands at almost 24 per cent since 2014. Regeneration projects are also likely to aid property growth, with the city centre undergoing a multimillion-pound facelift to transform the Waterside area, which in turn is encouraging further investment.

Manchester

Manchester has become one of the most attractive cities to live and work in today, with many young professionals seeking out great employment prospects, a vibrant social life and a high quality of life.

It is also considered one of the UK’s top rental hotspots, with rising house prices and strong rental yields. The city’s population is expanding fast, and Manchester continues to be a very popular destination for buy-to-let landlords due to a strong economy, a rising population and good investment opportunities.

Developments have helped the city centre to spread out in all directions. The continued expansion of Manchester’s skyline has been impossible to miss, and the vast array of infrastructure and house building projects approved by the council over the past few years has certainly made an impact, with yet more still winding their way through the system.

Hometrack puts the city’s annual house price growth at 4.6 per cent, with the average house costing £172,400. Since 2014, annual house price growth has shot up to a whopping 22.09 per cent.

Liverpool

Liverpool continues to defy the gloomy outlook with an annual growth rate of 4.1 per cent. Admittedly, it is growing from a much lower base than much of the country, but it remains a robust investment location thanks to regeneration projects in the pipeline, a good jobs market and rising tenant demand.

Estate agents JLL predicts that property prices in central Liverpool will rise by 2 per cent and rents by 3.5 per cent over the next 12 months. With the average house costing around £122,300 according to Hometrack data, there may well be rich pickings for landlords, or those looking further afield to expand their portfolios.

12 December 2019 - 2:07pm
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