Manchester Rental Yields Surpass London Returns

Manchester property investment is gaining traction as landlords move away from London in search of stronger rental yields and returns. The reason? Better rental yields and a more favourable investment environment.

Manchester Leads the Way in Rental Yields

New data reveals that Manchester now offers landlords some of the most attractive rental returns in the country. Research by Helix Law shows landlords in Manchester enjoy average yields of 4.21%. In comparison, London offers just 2.25%.

London still boasts the highest rental prices overall. However, its steep property values sharply reduce the return on investment. The average property in London costs £673,653, while in Manchester it’s just £247,000. Therefore, London is losing its profitability edge.

“Manchester is a great example of why savvy landlords look beyond high property prices,” notes Alex Cook, a commercial and property litigation solicitor at Helix Law. “Lower purchase costs can still lead to impressive yields, especially when tenant demand remains robust.”

The Capital’s Declining Appeal: Manchester Rental Yields

Despite its global reputation and strong rental market, London has slipped to fifth place in the ranking of cities offering the best yields. Other cities, including Edinburgh and Birmingham, have overtaken the capital due to more affordable property prices and consistent tenant demand.

A key issue is the capital’s inflated property market, which makes it difficult for landlords to generate strong returns without a massive initial outlay. The disparity between property values and achievable rent continues to squeeze yields, making alternative cities more appealing.

The Northern Powerhouse’s Rising Demand

Manchester, in particular, has benefitted from an influx of renters and buyers moving away from the capital in search of better value. Over the past decade, the city has seen rapid development and regeneration. As a result, it now attracts professionals and students.

A booming tech sector, thriving cultural scene, and improved transport links have all contributed to the city’s growth. As more people relocate north, the demand for quality rental accommodation has surged – driving up rents and, in turn, yields for property investors.

Hidden Costs and the Landlord Squeeze: Manchester Rental Yields

While Manchester’s appeal is growing, landlords across the UK continue to face increasing financial pressure. A combination of regulatory changes, reduced tax benefits, and soaring agency fees has taken its toll on the sector.

Hello Neighbour, a property management agency, estimates that landlords are losing as much as £2 billion annually in London alone due to what it describes as “excessive fees.” These include exit fees and restrictive contract terms. In addition, management charges can reach up to 20% of annual rent.

These spiralling costs have left many landlords questioning the viability of remaining in the market – especially in cities like London where yields are already tight.

Calls for Reform Amid Growing Uncertainty

The financial strain on landlords has led to renewed calls for policy reform. With the Renters’ Rights Bill on the horizon, some within the industry are urging Labour’s Angela Rayner to introduce measures that support landlords as well as tenants.

Many fear that without balanced reforms, more landlords will be driven to sell up – reducing rental stock and adding pressure to an already strained housing market.

Tax policy changes and tighter regulations are forcing landlords to sell. As a result, many are exiting London and the South East. This trend, Zoopla warns, could have a knock-on effect on local house price growth.

The Future of Buy-to-Let Investment

As the landscape continues to evolve, landlords are being forced to think more strategically. With yields in London stagnating and costs rising, cities like Manchester present a compelling alternative.

The message is clear: high property prices don’t always equal high returns. For those willing to look beyond the capital, the UK’s regional cities offer promising opportunities – with Manchester leading the way.

The question now is whether the government will act to create a more stable and fair environment for landlords, or if the exodus from the capital will continue to gain momentum.