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The best towns for buy-to-let investment

Analysis of void periods, house prices, yields and tenant affordability reveals the most profitable areas for landlords

A buy-to-let property with a high yield may seem like an attractive investment, but not if it’s standing empty. New data has revealed the towns with the highest void periods and lowest affordability for tenants.

When looking for the right area to buy in, landlords often consider the yield – the cost of the home divided by the achievable rent. Equally important, however, is how easy it is to find a tenant.

Which? explains the trends and factors you should consider when buying a property as an investment.

  • Our expert impartial advisers can help you find the best buy-to-let mortgage for your circumstances – call Which? Mortgage Advisers on 0800 197 8461.

Towns where landlords are most vulnerable

Yield is often top of mind for landlords buying in a new area. However, a property will only produce income if it has a tenant, which is why void periods are also worth considering.

New data from Gatehouse Bank has evaluated areas by annual yield, average time on market (meaning days a property is advertised before a tenant moves in) and rent as a percentage of average earnings in the area.

These factors were then evenly weighted to identify areas where buy-to-let income was potentially insecure. Namely, those with comparatively long days on market and low yields, but where rent makes up a significant portion of earnings.

On this basis, Gatehouse Bank named Winchester as the town where landlords are most vulnerable. On average, it takes landlords 248 days (more than half a year) to find a new tenant in Winchester. The average property price is a comparatively high £549,706, which brings down the annual yield, and tenants spend well over half their income on rent.

Cambridge, in second place, had an even higher rate of days on market and lower yield. But was redeemed by its comparative affordability, with tenants spending 45% of their income on rent.

You can see the full list of the 10 areas Gatehouse ranked as the riskiest for investment below.

Rank City/town Avg. price Avg. days on market Annual yield (%) Rent as a % of earnings
1 Winchester £549,706 248 3.1 56.2
2 Cambridge £446,938 251 2.9 45.6
3 Chichester £413,343 269 3.3 45.8
4 Warwick £353,197 254 3.0 40.0
5 Reading £415,192 230 3.4 46.7
6 Woking £515,941 229 3.6 61.3
7 Watford £419,815 207 3.2 47.3
8 Chelmsford £375,346 224 3.2 42.8
9 Oxford £510,110 261 4.2 70.8
10 Guildford £571,279 202 3.6 69.4

Source: Gatehouse Bank

Of course, this doesn’t mean all buy-to-let properties in these areas are equal. If you have a property that is particularly in demand, the time it takes to find a tenant may be much shorter.

Moreover, averages don’t tell you much about how your particular property will perform. For any property you’re considering buying, it’s important to compare it to similar properties in its immediate vicinity, rather than relying on general statistics.


Strong areas for landlords

Using the same methodology, Gatehouse identified the areas where landlords were in a strong position – meaning fewer days on market, high annual yield and rent making up a small percentage of average earnings.

Bootle in Merseyside emerged as the most favourable area, with a high yield of 5.6%, just 183 days on market and rent making up less than a quarter of average income.

The top 10 towns identified by the research are below.

Rank City/town Avg. price Avg. days on market Annual yield (%) Rent as a % of Earnings
1 Bootle £100,527 183 5.6 22.3
2 Inverness £184,849 124 4.8 30.9
3 Stoke-on-Trent £145,904 147 4.2 22.6
4 Barnsley £136,497 168 4.3 22.3
5 St Helens £133,460 178 4.3 21.6
6 Telford £167,408 131 4.0 25.2
7 Dundee £154,714 169 4.3 23.3
8 Oldham £146,511 173 4.5 24.5
9 Southport £195,796 115 4.2 30.9
10 Bolton £154,710 173 4.7 27.3

Source: Gatehouse Bank

How important is capital growth?

Rental income is one of the key benefits of property investment, but it’s also worth thinking about whether the value of the house will grow over time.

Take, for example, Winchester. Between 2013 and 2018, the average house price in the region has grown by more than 30%, netting a tidy profit for landlords who bought at the right time.

The local authority in which Bootle sits, meanwhile, has grown by 20% in the same timeframe.

Of course, past performance is no guarantee of future growth. Even in fast-growing regions, prices may slow in coming years, or even begin to decline. Numerous factors affect the value of properties, most of which cannot be predicted at the time of buying.

That said, it’s worth looking at sales prices in the region, and considering what factors may promote (or hinder) price growth in the time you’ll own the property.

How to choose an area for buy-to-let

When deciding where to invest in property, it’s important to consider the following factors:

  • What are similar properties in the local area renting for? Look at what’s currently being offered on the market, and talk to local lettings agents.
  • Will the rent sufficiently cover your mortgage payments? Most lenders will expect your rental income to cover up to 125% of the mortgage each month.
  • How long do similar properties stand vacant before being let out? Keep a close eye on listings for properties that have the same features as yours to track approximate timeframes.
  • How much demand is there in the local area for homes like yours? Does the home suit the local demographics – and is the price point affordable?
  • What features does the property have that may boost, or bring down, its rental value?
  • How far is it from your main home? Are you comfortable trusting an agent to manage it for you, or would you rather be able to keep an eye on the property yourself?

If you’re deciding between multiple possible areas, you can compare key stats using the tool in our guide to finding the best places to buy.

Do you need a buy-to-let mortgage?

Talking to a mortgage broker can help you find the best product for your circumstances. If you’d like to speak to Which? Mortgage Advisers, you can request a free callback below.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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