Landlords have identified London and Manchester as the most attractive cities to invest in buy-to-let (BTL) properties in 2020, a recent survey has revealed.
London and Manchester named top buy-to-let investment locations
The survey of 800 UK landlords has revealed that London and Manchester are the cities where landlords expect the buy-to-let market to be most robust this year.
The research conducted by business and landlord insurance providers Simply Business found the two cities combined received over a third (18% each) of the votes when the landlords were asked which city represents the best investment opportunity.
While London’s housing stock usually retains strong value, the city’s house prices fell 1.8% in 2019, ending the year as the weakest performing region in the UK. However, these most recent figures suggest that landlords may now see it as a good time to acquire more properties in the Capital once more.
London also shares the top spot with Manchester, where the buy-to-let market is driven by the city’s strong student population and flourishing media scene.
Birmingham and Liverpool second most popular cities for BTL
The research also suggests that UK landlords have identified buy-to-let opportunities across a broad selection of regions, with north-western UK cities Liverpool and Birmingham being voted joint second in the landlords’ top 10 UK BTL investment areas, securing 10% of the vote while Edinburgh, in Scotland, scooped third place. Edinburgh was closely followed by Bristol to the west, then Leeds to the north-west, Oxford in central England, then Glasgow in Scotland. Ninth was Southampton in the South and last but not least was the city of Sheffield in Yorkshire.
Landlords’ Top 10 cities for BTL investment opportunities in 2020
- London and Manchester (joint first)
- Birmingham and Liverpool (joint second)
- Edinburgh
- Bristol
- Leeds
- Oxford
- Glasgow
- Cardiff
- Southampton
- Sheffield
Bea Montoya, Chief Operating Officer at Simply Business commented: “Buy-to-let landlords are crucial to the UK economy, contributing a combined £16.1 billion through pre-tax spending. The sector also now houses 20% of British households and has a huge presence up and down the country, so it’s wholly encouraging that landlords view a broad spread of regions as attractive areas to invest this year.”
Over a quarter of Landlords plan to sell at least one home in 2020
This country-wide investor confidence is positive news for the UK buy-to-let market. However, the survey also uncovered news that landlords are planning to tighten their belts in 2020 by selling off at least one of their investment properties as a new series of legislative changes hit their bottom lines. The survey uncovered that:
- A quarter (26%) of UK landlords plan to sell at least one property in 2020, largely due to uncertain market conditions, government reforms and tax increases, meaning over half a million homes could be put up for sale
- 82% of landlords are not planning on buying properties in 2020
- A third (35%) also reported a decrease in their rental yield in 2019 and over a quarter (26%) expect to see a further decrease in 2020
The survey revealed that four-fifths (82%) of landlords are not planning on buying any more properties in 2020. Just one-tenth (13%) said they would buy another property this year, while a third (35%) also reported a decrease in their rental yield in 2019.
The top reasons landlords gave for wanting to sell were tax increases and government reform, such as shifting House in Multiple Occupation (HMO) licensing, which added new stipulations on the minimum size of rooms, as well as banning of admin fees.
Other reasons that landlords gave for planning to sell a BTL property included rising rental costs (10%), cashing in on their investment (9%), economic instability (5%) and slowing house price growth (4%). This comes after a third (35%) also reported a decrease in their rental yield in 2019, which added to their desire to sell.
Simply Business’s Bea Montoya, offered advice to those landlords considering selling properties in their portfolio: “Any landlord looking to sell up should make sure they understand the complexities surrounding buy-to-let sales, particularly if the property is occupied. Any tenants should be made aware of plans to sell as early as possible and given reassurance their tenancy still stands. When it comes to selling, landlords need to understand any tax implications involved, such as capital gains tax. If the property is sold for more than it was paid for, there will be a capital gains tax liability.”
Looking ahead to this year, over a quarter (27%) of the landlords surveyed expected to see a further decrease in their rental yield in 2020. One in five (18%) expect to see a decrease of 0-5%, and a further 6% of landlords expect to see a decrease of 5-10%. Only 2% of landlords expect to see a decrease of 10-15%. However, half (52%) were still optimistic and expect their rental yield will increase in 2020.
