A mortgage lender’s new Buy to Let City Tracker tool has calculated the best cities in the UK for buy to let investments – although it looks at only 25 locations.

The tool analyses five indicators – average total rent, the best short-term returns through yield, long-term return through house price growth over the past decade, the lowest number of vacancies as a proportion of total housing stock, and percentage of the city population in the rental market.

The lender, Aldemore, says the South East is the best region for buy to let investment with three cities making the top 10: Oxford (1st), Brighton (9th), and Milton Keynes (10th).

London lies in fourth place, behind Manchester and Edinburgh, with Norwich rounding off the top five. Cities in Yorkshire fare worse with two in the bottom five – Bradford (23rd) and Sheffield (22nd) – while Leeds is in 20th place.

Wolverhampton sits at the bottom of the list, despite other cities in the West Midlands such as Birmingham and Coventry performing impressively.

London is top for average total rent, Hull has the best short-term returns through yield, Cambridge was number one for long-term house price growth, Cardiff has the lowest number of housing vacancies, and Oxford has the highest percentage of population renting.

Oxford’s rapid growth and investment has narrowly won the city top spot overall; it has one of the largest private sector markets of all 25 cities, with 28 per cent of all residents in the city renting privately. 

This is combined with above average rental ability (on average £596 per room per month), a low level of vacant properties, and security in investment with property prices having increased yearly by on average 4.8 per cent the past decade. The only sore spot is that short term return through yield is one of the lowest on the list.

In some cases, London does outperform Oxford. For example, property prices have increased faster at 5.5 per cent a year on average over the past decade compared to 4.8 per cent in Oxford. 

However, despite strong rents the very high property prices in London (£617,238 on average) means annual rental yields are very low for a new buy-to-let purchase at only 3.0 per cent.

Nottingham ranks seventh offering a short-term yield at 7.3 per cent and the market size hitting an impressive 24 per cent. 

“The UK housing market has never been a singular thing, instead made up of multiple smaller markets with their own unique conditions and challenges. There have been numerous regulatory changes recently and persistent economic uncertainty but this affects every region differently” explains Aldermore’s mortgage director Damian Thompson.

He adds: “Going forward, landlords will need continual backing and advice from lenders and the wider industry so they can provide choice, diversity of tenure and quality properties for renters.”