Yahoo Finance The top British cities for landlords as house prices fall
Cambridge has been named the best city for property investment in Britain, as landlords brace for a market downturn.
Landlords face the threat of falling house prices, as would-be buyers are scared off by rising mortgage rates. It comes at the same time as a potential arrears crisis, as tenants struggle with higher costs.
But experts said the city was most likely of all major cities to weather the storm, saying it was a magnet for high-earning professionals.
Rental demand in Cambridge continues to outstrip supply as students flock to the home of one of the world’s most prestigious universities. For landlords, this means a steady flow of new tenants and workers taking up well-paid jobs in academic circles as well as in the nearby scientific industries, according to research from real estate firm Colliers carried out for this newspaper.
Its analysis looked at 20 cities across Britain, including Cambridge, Oxford, London, Glasgow and Edinburgh, examining factors including house prices and rental yields, economic performance, quality of life, educational levels and the environment.
Although property prices are higher in Cambridge compared to the national average, high-earning potential means residents are likely to be able to continue to afford rising rent prices, the study found.
Employees in Cambridge enjoy the highest median income out of the 20 cities analysed, at £34,165.
The average rent is £1,431, with yields at 4.1pc, and the average price paid for a buy-to-let is £472,000, according to Hamptons estate agents.
Alex Bloxham, of Bidwells estate agents in Cambridge, said: “They’re not typically great yields but the capital growth is what you’re looking for, as well as the consistency of rent you’re getting. The void periods are very minimal and the demographic of tenants is very good.”
Investors who bought homes ten years ago have reaped the rewards of a 70pc increase in prices.
Analysts believe the ongoing expansions of research centres in the city – the Cambridge Biomedical Campus in the south and Cambridge Science Park to the north – will further bolster demand from renters in the coming years.
Mr Bloxham said there had been a “shortage” in available rental properties, but said more homes were being built to accommodate a growing population.
The second-best place for investors according to the study was Edinburgh, followed by Glasgow, Oxford and London.
Demand in Edinburgh is propped up by a large population, a diverse economy and low unemployment, with residents that tend to be highly-skilled workers.
The average value of properties sold as rentals is £267,000, with rent prices at £1,061 a month, according to Hamptons. Yields are 5.4pc and house prices are up 59pc in the last 10 years.
Kevin Coughter, of Colliers, said the “surprise entrant” to their top three was Glasgow, which has had a “meteoric rise” in their rankings particularly because of the strong house price growth of 35pc over the last five years.
The average property sold to a landlord costs £134,000, and over 10 years price growth has been 64pc, according to Hamptons.
Mr Coughter said: “The city also benefits from a thriving business community with lots of start-ups as well as large corporations having a base there. The strong artistic base, nightlife and easy access to the tourist hotspots of Scotland also make it a great place to buy in.”
Despite high price growth, Glasgow benefits from being more affordable for buyers and renters, and has a greater proportion of properties with higher EPC ratings.
The city offers one of the highest rental yields, at 7pc, and its employment prospects have improved considerably. Rents average £851 a month, according to Hamptons.
Some landlords have been selling their properties in Scotland in response to a rent freeze imposed by Nicola Sturgeon’s Government.
However, the freeze only applies to existing properties; rents on newly-let properties have risen sharply as tenants compete for fewer available homes, which could be a boon to a new investor.
Elsewhere in England, Oxford offers further opportunities for investors. The average buy-to-let property is sold for £456,000, rents are £1,517 a month and yields are 4.3pc, according to Hamptons. Prices have risen by 62pc in the last 10 years.
Like Cambridge, Oxford benefits from its ties to a prestigious university, with a highly educated and affluent population.
Immediately to the south of the city, Science Vale is the home of the globally recognised science and innovation centres of Milton Park, Culham Science Centre and the Harwell Science and Innovation Campus – key sources of well-paid employment.
Investment in transport and infrastructure is another bonus: work is currently underway on the East-West rail project, which will create a fast connection to Milton Keynes from 2025.
