Soaring inflation, rapid house price growth and global turmoil marked the 2022 housing market. Buyers were left with growing uncertainty about whether they would see a return on their investment. So where are the rental hotspots of the UK in 2023?
In 2023, property investors will be keen to know where the best areas to invest are. Buy-to-lets can be a difficult investment to get right, so knowing the best places for house price growth, rental income and rental demand will help you feel more confident.
A buy-to-let mortgage will often have higher interest rates and fees than other mortgages. To get the best deal on your mortgage make sure to speak to a mortgage broker who can compare buy-to-let mortgages before investing in a property.
To help you make the most of your money, we reveal the best areas in England and Wales to purchase buy-to-let properties. Areas across England and Wales have been analysed on four key factors which determine their potential for buy-to-let profitability:
House price change (2021 - 2022)
Rent price change (2021 - 2022)
Estimated gross rental yield (average annual rent divided by the average house price 2022)
Rental demand (made up of five sub-factors, 2021 - 2022)
Privately rented households per 1,000 people
Annual income change
Annual poverty rate change
Annual employment change
Leeds, Yorkshire, ranks as the joint-top best place for property investors to purchase rental properties, alongside Bristol. Leeds has recorded some exciting statistics over the last two years, making it an attractive location for buy-to-let investors. The average house price in Leeds last year was £246,876, a 14.9% increase from 2021. The average rent in Leeds has increased by 13.6% to £795 per month (£9,540 annually), which brings us to an estimated 3.9% gross rental yield.
Leeds is known as the unofficial capital of Yorkshire, and for good reason. Built around the River Aire in the eastern foothills of the Pennines, the city is bursting with life and culture, home to four universities and the renowned Leeds Kirkgate Market, one of the largest indoor markets in Europe. Leeds is also one of the few UK cities to have high-rise buildings, offering a breathtaking skyline.
Bristol ranks as the joint-top best place to purchase rental properties in England and Wales, alongside Leeds. Bristol recorded a 14.4% increase in average house prices and a 14.3% increase in average rent. We calculated the estimated rental yield of a property in Bristol at 3.9%, using average house prices and rents. Bristol has also recorded steady increases in population, income, and employment over the last two years.
Situated on the River Avon, Bristol is a modern city most known for being the first British city to be awarded the European Green Capital Award. The Clifton Suspension Bridge is a major landmark of the city and arguably its most famous. In 2014 and 2017, Bristol was named the best city in Britain to live in. Bristol's main business and economy are built in creative media, electronics, and aerospace.
Bolton is a great place to invest in buy-to-let properties, with a potential rental yield of 3.8% on its average house price and rent. Bolton saw a 13.6% increase in house prices from 2021 to 2022 and has also seen solid rental demand statistics, from a growing population to massive increases in employment and income in the area, earning it a rental demand score of 7.5/10.
Bolton has consistently ranked among the happiest places to live in the UK in recent years, taking the 25th spot in 2022. Bolton offers a rich topography of countryside, moorland, and commercial centres, alongside some stunning architecture which has been featured in numerous film productions. The borough is home to major manufacturing and logistics companies.
Tameside has recorded some attractive statistics last year. House prices rose by 14.9% and the average income of residents increased by 11.6%. This Greater Manchester Borough is an attractive area for property investors, earning a solid 7.2/10 rental demand score and a 9/10 property investment score.
Tameside, a Greater Manchester borough, is well-known for its bustling markets and a large variety of community events. With a rich history that extends back to the Stone Age, Tameside encompasses urban centres, moorland, and the spectacular vistas of Werneth Low country park.
Milton Keynes saw a massive 16.2% increase in its average house price from 2021 to 2022. This puts it within the top 10 areas in England and Wales with the largest house price growth over this period. Milton Keynes also reported a solid 8.9% increase in rent and we calculated the potential rental yield in the area at 3.7%.
Milton Keynes is perhaps most known for their widely accessible public art. The borough is home to a 1,400-seat theatre, a municipal art gallery, two multiplex cinemas, a 400-seat concert hall, a 30,500-seat football stadium, and a 65,000-capacity open-air concert venue. Milton Keynes also hosts the emerging Milton Keynes International Festival, where multi-arts programs are staged in unusual places and public spaces throughout the area.
Capital growth is possibly the most important factor to consider when buying a property, but investors should not ignore the importance of rental yield. Making sure your property can pay for itself every month is far more important than picking up a discounted investment or banking on a theoretical profit when you sell.
Rental yield is the return you are likely to see on a property investment through any rental income you will accrue. It is calculated by dividing the annual rental income of your property by the total amount you have invested in that property.
We have estimated the gross rental yield (the average annual rental income divided by the average property value) of each local authority in England and Wales to give you an idea of how much return you will be likely to receive when renting a property in these areas.
Note that these estimates are based on calculations of gross rental yield using the average house price and average annual rent in each local authority.
Blackpool and Burnley show the biggest potential for high rental yields. The rental yield calculated with Blackpool’s average house price and average annual rental income comes to 4.7%, the highest in all of England and Wales.
In joint first place is Burnley. Burnley’s estimated rental yield was calculated at 4.7%, the second highest in England and Wales. Burnley also has the lowest average house price in England and Wales, standing at £117,804 as of 2022.
Should you buy a property in Newcastle upon Tyne for the city's average house price and rent it out at the city's average annual rent, you can expect to make a decent rental yield of 4.5%
|Area||Average monthly rent 2022 (GBP)||Expected annual rent||Average property price 2022||Estimated gross rental yield|
|Newcastle upon Tyne||£725||£8,700||£192,611||4.52%|
|Barking and Dagenham||£1,300||£15,600||£359,766||4.34%|
Malvern Hills, a designated biological and geological Site of Special Scientific Interest, recorded a whopping 23.9% increase in house prices in just 1 year from 2021 to 2022. The average house price increased from £296,942 to £367,855.
In 2021, Stroud’s average house price stood at £312,121. By 2022, this had risen to £367,790, a 17.8% increase. Stroud is most known for its industrial heritage where former textile mills lie along the valleys with some still operating as guided tours.
Mansfield saw an exceptional 17.7% growth in house prices from 2021 to 2022, the third highest in England and Wales. This market town in Nottinghamshire saw its average house price increase from £161,456 to £190,061 in the space of one year.
|Rank||Authority||£2,021||2022||YoY Change 2021-2022|
The local authority which saw its average rent price increase the most in the last year was Adur, in West Sussex. Here, average rent moved from £900 to £1,050, an increase of 16.7%.
Located on the south coast, Adur is a desirable area, especially towns such as Shoreham-by-Sea, and also has good links to nearby Brighton & Hove.
Of the country’s major cities, Bristol saw its rents increase the most in the last year, going up by 14.3%.
Bristol was named the best city in Britain to live in both 2014 and 2017 and has seen significant population growth since, which could explain the increase in rent prices.
Another area in the South West comes in third place, with rents in the Gloucestershire town of Stroud increasing by 13.7%.
Located in the Cotswolds, the natural beauty of the local area can result in high demand in Stroud. However, it’s a small town, so inability to keep up with this demand may push prices up.
|Rank||Area||Average Rent 2020-2021||Average Rent 2021-2022||Change|
|2||Bristol, City of||£1,050||£1,200||14.30%|
Taking into account the number of privately rented households and the annual population, income, poverty rate and employment change, here are the areas with the greatest rental demand.
Scoring the highest across all five factors is Salford, Greater Manchester. The employment rate in the city increased by 6.7% in the last year, among the highest in the country, while it also has a high number of renters.
Salford’s proximity to Manchester is one of the reasons for its popularity, but the city has also undergone a lot of regeneration. For example, many are employed at the BBC’s MediaCity and other notable companies based at Salford Quays.
In second place is Lincoln, where the poverty rate has dropped by around a fifth in the last year and income is up 13.8%.
Among other reasons for the city’s popularity, the local university recently opened a new medical school, increasing demand among student renters.
The area in third place is located in London, with the borough of Haringey having 141.5 privately rented households per 1,000 people.
Of course, demand in London is always high, and Haringey is located just a few miles north of Central London, but the area offers more affordable rentals.
Buy-to-let mortgages will likely expect a larger deposit, usually between 20% and 40% of the property's value. Most buy-to-let mortgages are also interest-only, meaning you will only pay the interest on your mortgage each month, not the capital amount. At the end of the mortgage term, you will be expected to repay the original loan in full.
After the continuous increase in prices seen in the UK over the last few years, many predict a slight house price correction in 2023. Mortgage borrowing costs are also much higher than previous years, making it harder for first-time buyers to get on the property ladder. Zoopla expects UK house prices to fall by a modest 5% in 2023.
Ways to invest in property include investing in buy-to-lets, investing in property development, buying a new build to sell on, investing in property abroad, and investing in real estate investment trusts and other property investment funds. Be sure to investigate your options to find the best means of property investment for you.
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