Where to invest in buy-to-let property in 2016

15 January 2016

When it comes to investing in properties to let in the PRS, finding the best markets in terms of demand and price rises is the best ways for landlords to ensure they are able to make not only strong returns, but also growing investments that will continue to allow them to make increasingly impressive returns for years to come. 

With this in mind, it's important to know where the strongest markets are, and one of the best indicators of this is rental prices. Areas where prices for new tenancies are growing quickly are most often those where demand is growing, and this can be a sign that the sector in those cities is going to perform well for some time. 

We take a look at just some of the best investment markets at the moment, based on price growth in 2015.

London

The rental market in the capital is perennially strong, with demand from mobile young professionals having been sustained for a number of years, and 2015 is no different. 

According to the most recent HomeLet Rental Index, London saw impressive rental growth in 2015 that took the average price per calendar month to a new all-time high at the end of the year of £1,596. 

For the year as a whole, prices were 11 per cent higher in Greater London than they were in 2014, indicating that the market still has some real strength, and importantly, room to continue to grow, making it a great place for investors to put their money, even if prices to buy are often very high. 

Growing southern cities

London isn't the only city in the south of England that saw strong growth in 2015. In fact, it wasn't even the fastest growing city in the area over the course of 2015, as two other cities beat out all others to top the charts. 

Both Brighton and Bristol were increasingly popular in 2015 as more and more people looked for rental homes in each of the cities. Their overall rental growth for the year of 18 per cent was higher than any other city. 

Brighton broke the £1,000 per month barrier for the first time, with the price in 2015 rising to £1,078 from the average of £913 that was seen at the end of 2014. Meanwhile, prices in Bristol grew very sharply from £767 per month in 2014 to £904 per calendar month in 2015.

The north and Scotland

There used to be a stark north-south divide in the rental market across the UK, but in the last few years, the north of the country has started to pick up as more and more businesses head that way with their operations. This has helped to swell rental demand from young professionals, meaning there has been a quick rise in prices in recent times. 

Two of the cities that saw this sort of strength in 2015 were Newcastle and Edinburgh, both of which outpaced London, according to the rental index from HomeLet. 

In Newcastle, the average price grew from £506 per month in 2014 to £588 in 2015, while Edinburgh's rental prices climbed from £707 per month to an average of £819 per month last year. This meant that both cities saw very strong growth in 2015 of 16 per cent. 

Source: Lettings Agents News

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